I think Caesar Seriona’s last post gets at some of the big difficulties in making realistic neutrals – how do you model fear? How do you model indifference? Portugal’s sympathies were fully with Britain, but they were afraid of Spain and Italy. Spain’s sympathies were fully with Germany, but they were exhausted by their civil war and in no mood to fight anyone. Sweden probably didn’t like either side very much, but they might have been preferred being peacefully absorbed into a British, Russian, or German empire rather than fighting a bloody and doomed war of self-defense. E.g., if Finland had already gone Soviet, how long would Sweden have held out against the Red Army? If London had already gone German, how long would Sweden have held out against the Nazis, etc.
And all of that ambiguity is before you even get into stuff like game balance.
I think if you’re looking for a scripted political game where countries do X if and only if trigger Y happens, then you might be better off with a card-driven game like Twilight Struggle, A Fire Upon the Lake, Labrynith: The War on Terror, and so on.
There might be a fix for the neutral rules in Axis & Allies, but it would have to be something simpler and more symmetrical than a laundry list of triggers.