Darokin's governement is based on Venice (even if it was an aristocracy and not a plutocracy), but Glantri City is based on the town of Venice, with canals and gondolas. And Venice being in a laguna in the sea, formerly being a naval power and ruling a mainly seaside empire (with islands, coastlines, ports) it sounds quite strange to imagine a Venice-like city ruling a landlocked country.
It's more than just government.
Darokin actually behaves like Venice, putting trade above all other things, and as you say employing navigation to project that trading power.
Sure, Glantri city itself is reminiscent of the actual Venice, but the Principalities of Glantri are far larger and more varied than the Venetian Republic ever was. There's a fair bit of France, Spain and Germany in the Principalities, as well as the occasional Italian flavor.
As has been said before, Mystara is a huge mish-mash of Earth cultures spanning the Roman Empire to Renaissance Europe, with stops in Turkic Arabia, pre-medieval Congo and magical Atlantis, among others.