After the Enabling Act of 1933 Hitler outlawed Non-Nazi parties on 14 July and the Reichstag had to abdict its democratic powers. Even before that law non-Nazi parties were harrassed.
Sure, last elections were in 1932, but this is besides the point. He used democratic structures to get to the power.
There's Democratic and democratic. Democratic is a faction, democratic (well, holding elections) is a government type. The faction can't declare war on others of their faction, but the government type isn't restricted as such.
You don't have to join and as GB you don't have to invite. But they were talking about principles... like democracy doesn't do bad things.
Also that talk about historical and ahistorical things. Let me tell you one thing about historical things... Germany invades USSR, they get bended over there and then USA wins the war (tongue in a cheek, plz don't butthurt). Everything else is ahistoric. Whole point of this game is to spin things around. That is also why you have different starting dates in HoI3 because, from my humble experience, in open simulation like this it is incredibly hard to get results close to historic ones. I was playing Brasil, never set foot in Europe and still Germans couldn't get close to even Leningrad.
Oh, and I don't mind if that less strict approach would be optional. So, let other people have more fun, will ya?