You could always do mind-numbingly stupid stuff in HoI III too. It is really up to the player to steer things in a more historical direction or not. Choosing Bhutan and beating up Japan is just as much of an option as picking Japan and slavishly role-playing the historical path of the Pacific War. That is all it is. An option.
Edit: People seem to be under some kind of delusion that you couldn't do stupid, fantasy things in previous HoI games. In HoI III TFH, I invaded the Japanese home islands as the Guangxi Clique, I have seen Let's Plays of people conquering the world as Albania, Luxemberg, [insert tiny, inconsequential country name here]. It has always been a possibility. A human player is 1000% more efficient than the AI, and with a proper understanding of the game mechanics, can exploit quirks to achieve ridiculous things. I personally never had much interest in doing that (outside the one Guangxi Clique game I played), because my interests lie in the historical. Therefore, I usually only did things that the country could historically do. The result? Things played out in a reasonably historical way.