Are transports in a hostile sea zone and owned by the attacker treated like allied units (ie, they are in the sea zone, but not present in the battle) or like war units?
They cannot attack, it’s specifically mentioned in the rules. They cannot block enemy ship movement. They can, however, defend, they just have 0 defense rating and must be selected last after all other ships have been lost.
It seems to me that transports are considered to be somewhere else away from your fleet when you attack. First you attack a sea zone, then the transports come in and land amphibious units, or come in and pick up units to transport them somewhere else. In any case, it seems that if your transports are in a sea zone with hostile units during the combat move phase, they are not in “combat” and do not “engage” the enemy, they are treated like allied units and considered to be somewhere else in the sea zone at that time.