I'm guessing this was an underestimate considering the Allies had a total of 140 divisions facing Germany in 1940, most of them French.
As far as I can tell: no, it's not an underestimate. That was the size of the French army in 1938-39. The other troops you mentioned were raised after the war started.
The British planners were considering the size of the active peacetime armies (on both sides) that would be available for action immediately if war broke out: not those which could be raised later but would need months of training before they could be put into combat. Note that the German army after mobilisation in 1939 had over a hundred divisions itself, rather than the 51 the British estimated it as having; but again, that larger figure includes called-up reservists.
For reference, this is the French army's Order of Battle in August 1939:
Infantry divisions (Division d'Infanterie, DI):
10th DI (Paris), 11th DI (Nancy), 13th DI (Besançon), 14th DI (Colmar), 19th DI (Rennes), 21st DI (Nantes), 23rd DI (Tours), 36th DI (Bayonne), 42nd DI (Metz), 43rd DI (Strasbourg).
Motorised divisions (Division d'Infanterie Motorisée, DIM):
1st DIM (Lille), 3rd DIM (Amiens), 5th DIM (Caen), 9th DIM (Bourges), 12th DIM (Châlons-sur-Marne), 15th DIM (Dijon), 25th DIM (Clermont-Ferrand).
Mountain divisions (Divisions d'Infanterie Alpine, DIA):
27th DIA (Grenoble), 29th DIA (Nice), 31st DIA (Montpellier).
Cavalry divisions (Divisions de Cavallerie, DC):
1st DC (Orleans), 2nd DC (Lunéville), 3rd DC (Paris).
Note: in 1935 France had five cavalry divisions. They were in the slow process of upgrading them into light armoured divisions; by 1939 two (the 4th and 5th Cavalry Divisions) had been converted, as follows:
Light Mechanised Divisions (Divisions Légères Mécaniques, DLM):
1st DLM (Reims), 2nd DLM (Melun).
Armoured Brigades (Brigade de Chars de Combat, BCC):
1st BCC (Lyon), 2nd BCC (Nancy), 3rd BCC (Metz), 4th BCC (Versailles), 5th BCC (Tours), 6th BCC (Verdun).
In addition, 15 infantry regiments (the equivalent of 5 divisions) manned the Maginot Line. They weren't counted in the active army size listing, but thinking about it I'm guessing that's why the British said the French army was 40 divisions strong when only 35 were listed.)
Colonial Infantry Divisions (Divisions d'Infanterie Coloniale, DIC):
1st DIC (Bordeaux), 2nd DIC (Toulon), 3rd DIC (Paris), 4th DIC (Toulouse)
(Note: consisted of 6 regiments of white troops and six of black troops, mostly from Senegal.)
North African Infantry Divisions (Divisions d'Infanterie Nord-Africains, DINA):
1st DINA (Lyon), 2nd DINA (Toul), 3rd DINA (Poitiers), 4th DINA (Epinal)
(Note: recruited from Arabs, Berbers, and European colonists in Algeria, Tunisia and Morocco.)
Spahi Cavalry Brigades (BS):
1st BS (Compiègne), 2nd BS (Orange)
The colonial troops were treated as a 'rapid reaction force' able to be deployed to a danger spot quickly.
Well yeah, that's what was so bad about Munich. It signalled that Britain and France had abandoned the Versailles order of eastern Europe, which let Germany and the USSR sort things out between themselves.
Not exactly. As far as Britain was concerned, the Munich Crisis was a case of the UK getting actively involved in Eastern Europe for the first time, when before it had never really bothered much about the region. Chamberlain famously described it as "a quarrel in a far-away country between people of whom we know nothing".
British policy in 1936-39 was based on the fact that Britain, France, Russia, Italy, Japan and the USA combined had barely managed to beat Germany in the First World War, and it had left them crippled. Now Germany was acting aggressively again - and the USSR was communist, the USA was isolationist, and Italy and Japan had gone over to Germany's side. That left Britain and France alone, and as such they had no serious hope of defeating Germany in a war. The best war plan the British could come up with was to sit on the defensive, blockade Germany for years, and hope that eventually they starved or a revolution broke out.
In the meantime, their only hope was to distract Hitler from war by offering limited and calculated concessions, and persuading him that peaceful negotiation rather than conquest was the best way forward. Meanwhile, Britain was frantically re-arming after allowing her armed forces to dwindle almost to nothing after WW1.
Appeasement failed because it assumed the German government was normal and concerned with its own rational self-interest. They didn't account for the fact that Hitler
wanted conquest and war. They assumed his more bombastic speeches were merely propaganda, and he would be more sensible in private: but in fact, he was
less sensible in private.
The USSR wasn't a factor in international politics in 1938. They were in the middle of the Great Purge, and their army was a shambles. Keep in mind that the Soviets had signed a defensive treaty with Czechoslovakia three years earlier: but it soon became obvious to everyone during the Munich crisis that they had neither the means nor the intention to honour it. As such, they weren't even invited to the Munich Conference. "Germany and the USSR sorting things out between themselves" wasn't something that happened until August 1939, a year later, and it came as a huge shock to everybody - including the former Soviet foreign minister, Litvinov, who lost his job when the NKVD sent troops to 'demand his resignation' and arrest most of his staff because he was considered too pro-Western.
Are you suggesting the Versailles treaty was basing itself on something that had happened over 700 years ago?
Yes. Let me quote to you Article 82 of the Treaty of Versailles in its entirety:
The old frontier as it existed on August 3, 1914, between Austria-Hungary and the German Empire will constitute the frontier between Germany and the Czecho-Slovak State.
When the Habsburg Monarchy collapsed, Czechoslovakia regained its independence based on the old Kingdom of Bohemia. The Allies didn't have anything to do with that, other than to recognise their independence after the event and warn Germany and Austria not to interfere.
You could argue that they should have forced the Czechs to cede the Sudetenland to Germany, based on the principle of nationality. Certainly in 1938 many people in Britain thought so too, and believed that Hitler had a reasonable case to say Germany had been treated unfairly. But back in 1918-19, when the Czechs were celebrating their freedom from Teutonic oppression, that would have seemed like a betrayal.
