To begin, don’t throw the baby out with the bath water. For all it’s flaws, the system works pretty decent, all things considered (or at least far ahead of what we had in HOI III). For example, it allows you to take some territory and puppet the rest of the country, which the Kaiserreich event-based system doesn’t really allow for unless there are claims/cores. Also it allows for nations with different interests to have influence on the peace, without the "war leader" dictating everything like other Paradox games.
A couple suggestions to improve though:
Nations that capitulated should get no or next to no warscore. If your allies bailed you out, you will have limited say at the negotiating table.
Puppets should get little to no score and should give it to their master if they do. Maybe dominions might try to take claims/cores, but then do the same.
Maybe the player shouldn't be subject to the above two, but it would help reduce the number of nations active in peace conferences.
Turn order should follow a cycle. It shouldn’t be passable amongst the top two contributors (very abusable).
Allow for return of core/claim territory to non-combatants (happened after WWI with Eg. Denmark).
Allow nations of different ideologies to each puppet nations. Thus the first country puppeting wouldn’t get as much of an advantage, and you could see situations of Eg. East/West Germany or North/South Korea. This could also be done for releasing. Basically the Civil War system without the war.
Further refine peace conference AI to reduce border gore and moderate demands for minors and reduce ai penchant to nonsensically puppet. Only certain countries should have an interest in overseas colonies for instance (say majors and Spain/Portugal/Belgium/Netherlands).
Allow minors to refuse to surrender when faction majors do.
Change “untouched by the war” so that Eg. Canada sending troops to Europe/having destroyers fight U-boats doesn’t allow Germany to annex it after a successful Sealion (assuming Canada itself still far out of reach.
Have puppeting in peace conference give the new puppet nation no territory until it is explicitly given it. Allow this to be done on the same turn it is puppeted though.
Ensure all nations at war with the target are in the peace conference (right now if not everyone is at war with everyone separate peace conferences can occur, which often means the second peace conference will have little to nothing left, since everything is taken in the first).