I did just mention Waterdeep. Masked lords, chosen in secret, whose identity is kept from the public, rule the city state without any oversight.
Sounds like a despotic tyranny to me.
The Free City of Greyhawk absolutely IS a despotic tyranny. Here's the Wiki description:
In what way is that not a despotic tyranny? Or are we going down the nit picking road that I'm not using exactly the right word to describe this?
My point being, these are horrifying governments. The kind of thing we've spent centuries fighting. And that fact is entirely lampshaded. Of course it is. It wouldn't be a fun game otherwise. But, we should still recognize what's going on here - the romanticization of societies that were incredibly unjust and frankly horrifying in so many ways.
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Although I think maybe where we're not communicating that well is that you are presuming that only evil governments are despotic or tyrannical. I am not. A lawful good paladin King (note, not constitutional monarch), pure and noble of heart, who has not a single speck of evil in his soul is still a tyrannical despot.