Ok here is a better way to look at it. Lets say the german’s occupy crete. So the greeks are still a pro allied neutral, and if germany moves into there they will defend themselves. However, they will not try to retake crete, which on one hand seems odd, but on the other hand, they do not have the capacity to retake crete and defend greece so they choose to defend greece. In addition, they will not help the allies by attacking bulgaria, which also makes sense as they need to defend there land, not invade germany’s land. On the other hand, if the allies move units into greece, they join-up and will help them to attack bulgaria with the assumption there new allies will help them defend there homes in greece.
Also, mongolia does not count with the neutral rules, they are an exception.
And lastly, as far as the neutrals switching sides if you invade a true neutral, its not like they all declare war on you, it just means if your enemy makes an effort to help them defend against your insane aggression, that they will support your enemy in the war against you.
This is an abstract game, if you want a truely detailed WW2 game play hearts of iron.