Don't get me wrong--I think you have a lot of great ideas!
I'm just trying to think of a way that accurately reflects the fact that Luxembourg would have come to France's aid if the Soviets would have invaded, but never if France is fighting a colonial war in Algeria or Vietnam. As the rules stand now, you get every French ally in Vietnam. Historically, France would have loved it
Maybe there should be some way to "call allies" (sort of like in Victoria I or HOI)--that way the human player (and the AI) could pick and choose which countries to call on in war.
--The US signs a mutual def treaty with South Vietnam in 1962. In 1964, North Vietnam DoW's SVN. The US comes to SVN's aid, and calls on the UK, France, Australia, New Zealand, the Philippines and South Korea to come as well. The AI controlled countries respond like this:
--UK does not join the war, but sends $$ to SVN and a random unit design; no hit in US & SVN relations
--France refuses to join war; small hit to US and SVN relations, but much smaller than if it was a non-colonial (e.g. US vs USSR) war
--Australia sends a small detachment of ground, air and naval forces (3:2:1 ratio--3 ground bns, 2 Air squdns, 1 Frigate) to SVN
--New Zealand refuses to join war but sends small amount of $$ to SVN; no change in relations
-- Philippines and South Korea send troops (like Australia above)
This, I think, would give a bit more nuance to the system, vice a horde of German, Belgian, Italian, et al, troops running around Vietnam in 1950.
EDIT: It just occurred to me that you could tie which allies are called based on region. If a war started in Honduras (Hondo vs. Nicaragua), then the engine would limit the 'call allies' for the AI to only those allies in the region itself (North America). Example--AI Honduras (US leaning) is invaded by AI Nicaragua (USSR leaning). Honduras has a MD with the USA. Nicaragua has an alliance with Cuba. Hondruas will call on the US, but not any US ally (since it is not technically allied with them). Nic would call on Cuba, but not any Cuban ally (e.g. the USSR) for the same reason. The AI USA could send troops, aid, etc. up to a full DoW on Nicaragua (depending on DEFCON and relations--high DEFCON would act as a limiting factor, as the goal of the game is to NOT start WWIII; poor relations would encourage more aggressive actions).
You could even get more nuanced than that. High CB for Honduras would further reduce US aid (an overly aggressive country would be faced with the "well, you brought this on yourself" attitude).