My 2 cents after only playing one game (which is why it’s only worth 2 cents) is that it works fine if you can attack any true neutral nation and you’re only at war with that nation, even with only as many soldiers as that nation starts with according to the official rules.
I think it depends on what appetite your group has for rules. I played with a group of young gamers (video gamers that is) who had less appetite for complexity and rules and preferred speed over accuracy. The attack any neutral without consequences rule made it much more fun for this group: it’s fun to take over countries, plain and simple.
If you were playing with a bunch of guys like me (which you probably never will since I’m a little uncommon), then the best would be to have each country’s neutrality rules follow the treaties and obligations that country had during world war 2. Additionally, their military would be the relative size that it was as compared to the playable countries in this game as/of the starting setup (I’m afraid I wouldn’t have an appetite to adjust each countries military as the game went on according to the size it was at each time period, so a starting 1940 setup would remain throughout the game). You’d follow a chart showing the alliances. For instance, you want to invade Spain, you look on the chart and it mimics their treaties during the war: it says if you invade, you’re also at war with Portugal and their colonies in Africa (maybe there were more treaty obligations I’m unaware of). Additionally, if the invasion of the neutral country failed or if that country was liberated, a factory would be placed on it (major or minor depending on that country’s relative industrial capacity. The relative industrial capacities would also be listed on the earlier mentioned treaties chart, which may indicate that country may produce more than it’s territory value in units each round) and the aligned/liberating nation could place units on that country each turn. That country would have it’s own income though and would not go to the aligned/liberating nation’s pool of cash.
With the rules for a bunch of guys like me, yes, the allies may invade Spain with regularity, but they’d be taking on a large military. They’d also need to make sure their invasion stuck, otherwise, if the Axis liberates Spain, they will have an operational factory pumping out a pretty good amount of units each round. This inverse is true with potential Axis invasions such as Turkey, Sweden, Switzerland, etc.
You have a good point about not over complicating things. It would be fun to just steam roll Turkey or Spain with no strings attached like you do Yugo or Greece, or even France for the matter. Both sides would have opportunity to make attacks that benefit them. The axis could make some good early gains, but would eventually end up on the short end of the stick.
The Germans could blast into Turkey on on G3 (utilizing the strength of the Luftwaffe), and set-up a pretty nice secondary force opening up the oil NO’s of Caucasus and the Mid East (then march north). The Italians would also get access to the Black Sea to join in the action behind the protection of the Turkish straight. The UK would get pretty stretched out, and Russia still has its hands full with the main German front.
The US counters by invading Spain to establish a foot hold in Europe once at war, and the UK grabs Portugal and maybe the African colonies, Saudi etc….
Like you said you could also go the opposite direction and make up some treaties and alliances, plus a way to sway them. Could have it that only the axis can attack true neutrals, but if certain events or situations come up the allies are allowed to violate neutrality of some countries. Certain events trigger the activation of neutral minors to go pro axis/allies etc… Just depends on what you want out of your entertainment.