My house rule is simple: if someone invades a strict neutral, then the other strict neutrals are not pro-allies or axis. BTW: sweden is in the game strict neutral, but they give iron ore to the germans.
Sweden sold Iron Ore to the Germans, Ball Bearings to both sides, licensed the Bofors gun to the US and the UK, supplied the Allies with a V-2 that landed in Swedish territory, and sold spare aircraft engine parts to Finland for US and UK aircraft that were operated by Finland with the tacit approval of the US and UK. In my house rules for the original Europe game, Sweden has 3 IPC that go to whoever controls Norway, while remaining neutral.
I am working on a set of rules using the Political Action Cards of the first Attack Expansion to influence neutrals one way or the other, with Turkey being the main neutral that I was thinking of, along with Thailand, and possibly Spain.
I do like the idea of grouping the neutrals into geographic blocks, as they would be most interested in intervention by one side or the other near them. However, Brazil entered the war in August of 1942 on the side of the Allies, and the US was using Brazilian air fields for Trans-Atlantic aircraft delivery to the UK in the Middle East prior to 1942, so I am putting that in the Allied camp as soon as the US is in the war.