The discussion certainly derailed, but I strongly disagree with your latter point here. Factor leadership (the ability to invite/accept) changing once the leading government is forced to capitulate makes some sense, as that would weaken their political standing in the alliance - maybe especially in authoritarian nations. Mussolini surely would have seized control of the Axis had Germany capitulated before Italy. In democratic states, where politics is less based around individual leaders, that might not happen as easily. Continuity of command might have proven more important than who represented the most power - until the end of the war, that is.
That the faction leader should seize partial (or complete) control of capitulated states seems both quite ahistorical and very bad for gameplaying reasons. A mechanism that might make a nation stronger by "sacrificing" its allies feels extremely exploitable and ill-advised. Makes more sense that the government (which isn't eliminated, just unlanded) keeps in control of whatever forces they still have.
