Well, Hungary was not so much severe treated, being German most faithful ally to the very end. Their outcome from the WW2 was virtually the same like "first to fight" Soviet "ally" Poland actually...
I personally think the wisest solution was the Czech one: just to avoid nonsense unequal fight, still declaring fellowship with the Allies.
"Most faithful ally" is a bit of a misnomer, especially after Hungary was formally occupied by Germany, at least partially due to its attempts to secure a separate peace or a change of sides. Admiral Horthy, the regent and leading figure within Hungary, and the Hungarian Parliament, were on very poor terms with Hitler from even before the war, and their acceptance into the Axis was seen as a matter of "bending, so as not to break", rather than defying Hitler openly. It was also noted how well France and England had defended Czechoslovakia and Poland (not at all), and how poorly the Czechs and Poles were being treated under German occupation. The Allies (France in particular) were openly hostile toward Austria and Hungary (to prevent any possible resurgence of the Hapsburg emperors ever again), with the Little Entente destroying any chance of uniting the region against either German or Soviet expansionism, and previous Soviet encounters had been disastrous. The only viable options were to bend to Hitler's demands just enough to avoid war with Germany, or suffer invasion and foreign occupation under the Nazis. Ultimately, Hungary still failed to do the former.
The thousands of Jews who fled Nazi occupation and ended up being admitted to Hungary were a major and ongoing sticking point with Hitler, as were the various half-way measures which Hungary enacted under intense pressure, and eventually he invaded anyway, citing the presence of "armed Jewry" in Hungary as a direct threat to Germany. By that point, Hungary was actively looking for a way out of the war, but had been rebuffed by the UK in its attempts to negotiate a separate surrender or change of sides, with the Allies demanding absolute surrender and essentially turning them over to Stalin. The final determined German defense of Budapest against the advancing Soviets may have had a lot more to do with buying time to round up and deport those refugees to Germany than with trying to preserve Hungary.
If "faithful" means fighting a common enemy to the point of complete national exhaustion, it may have more to do with a long sequence of bad experiences with the Soviets, and less to do with supporting Hitler.
For more details on the political situation leading to the war from the Hungarian angle, check out the book "Hungary, the Unwilling Satellite", by former US Ambassador to Hungary J. F. Montgomery, as seen by a "neutral" witness to the events as they unfolded.
