You can do pretty much anything with an historical setting that you could do with a fantasy/imaginary setting.
The one thing I would say with regards to historical games is the following: if you make it so that "the tide of history can't be changed under any circumstances", then you're basically not playing an RPG anymore, and the characters are helpless witnesses to a story being told; so that sucks ass.
On the other hand if you say "from here on, its not really history, so anything goes!", then you're missing the point and you may as well not be running an historical game.
The balance point that I subscribe to is this: History is a force. It is the weight of circumstances, which builds up and accumulates, so that generally things happen for a reason. When in a particular case those circumstances are just starting to build up, it is easier to steer or disrupt history toward a different direction; when those forces are in plain bloom, its extremely difficult without doing something that's likely to totally fuck you over too.
So history CAN be changed, it just doesn't generally want to change, because its like a river; things happened the way they did because of all kinds of factors that lent their weight to it being that way. Its not impossible to change history but its also not very easy, at least at crucial points.
(Originally posted June 3, 2010)