Small update on this.
I recently saw a neutral declare war on a neutral and after checking my settings (this was in one of my mods) I realized the declaring country had a slight leaning.
They still won't ally etc with each other.. or I haven't been able to get them to. Neutral nations still seem more hesitant to declare war on a fellow neutral
They refuse to declare war on someone with the exact same sphere leanings as them. So a 0.0 wont declare on a 0.0, but a 0.25 will declare war on a 0.0 etc. While both are technically neutral one has a leaning the other doesn't.
Update:Removed false hypothesis. The remaining one is correct. They will not declare war on someone with the
EXACT same sphere leaning as them.. even if both are absolutely neutral. Further more Alliances are only signed if the 2 nations heavily lean toward the same sphere.
If I had to guess. I would say that it checks sphere leanings as part of the "should I declare war" process. And if it comes back as the same leaning it decides not to declare. Which is what you would want if you have say 2 Fully NATO or Warsaw Leaning nations. But this leads to a lack of aggression when you have 2 totally neutral or slightly leaning nations.
I'll keep poking at it.. its probably working as Intended as far as BG is concerned. I don't like it but it works for the campaign which is the #1 priority for them.
Update 2: I've now confirmed this. My question becomes.. how many numerals after the decimal are valid? I know 2.. such as 0.01 but can I get away with 3. Such as 0.001, 0.002 etc. Hopefully I'll get a response before I test it.. although chances are Balt doesn't know for sure.

This means scenarios like shattered world can be fixed.. albeit with a decent amount of work.
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Si vis pacem, para bellum
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