Halifax always was a weakling
Yes he's obviously the fault in all of this

I wonder how his legacy would be like. First he and Chamberlain doesn't support France, Romania, Czechoslovakia and Yugoslavia in their war against Germany, but instead waited for them to fall and Germany to declare war on Poland. Now they are just sitting back again and watching Trotsky taking over Europe and the Middle East. This isolation might not be so splendid in the end

But I gotta say it is strange they haven't done anything, usually in late game (these are in my experiences btw) and there's peace and the Soviet AI choose the Southern Thrust focus the allies tend to guarantee one, two or all three of the nations and the Southern Thrust result in a third world war. Perhaps it is a bug in my game, or that they are less willing to do so against the player or when the Comintern are so strong as they are now?
Edit: Now I must also admit that the plan is just to get so much land as the focuses grant me (I won't justify wargoals for conquering nations that the focuses don't grant me) and to back down when one of the Allies guarantee them or even invite them into the Allies. A premature war against the Allies over some oilfields in Iran or Iraq or Turkey simply isn't worth it. So if the AI know my plans they would know that all they need to do is to guarantee their indepence and I'll back off. The plan is to not go to war against the Allies unless it is absolutely necessary. Now UK have focuses that grant them war goals against Norway, Sweden, Belgium, Luxembourg, Iran, Iraq, Turkey and Afghanistan is their support of communism get sufficient.. If they go down that path, then the USSR in their paranoia might go on the offensive in a preemptive strike as they did against Germany, if that involve only an invasion of continental Europe or one of Britain remain to be seen. Enough ramblings for now
Considering that the West now has a market consisting of the Americas and Commonwealth (I.e...just itself) it is going to have nowhere near the wealth and power it held OTL. Not unless the exceptionally imperialistic and racist guys at the top decide to start properly investing and modernising Africa (a colossal undertaking mind!) in order to grow new markets and balance out power in the UN...though to be honest there is no way liberal democracy is going to compete with communism when the former is wielded by former and current imperial masters who hate your guts and the latter is being wielded by guys who want to set you 'free' and have a habit of kicking empires to death.
Honestly? The west isn't screwed at this point, or at least the Empire is. The friendly land connection between Africa and Asia has finally been severed. Now they have to rely on an increasingly expensive and easily sinkable fleet. With problems in India and at home, a complete failure in the Middle East and communism completely in control in Europe, I think the west may well end up tortouise shelling in America for a while and hoping the problems will just go away. But then you have the argument that if communism has literally unified the entire world aside from them, and aims to support workers and end discrimination...what on earth are the working classes of these nations doing supporting their enemies?
Russia hasn't won yet and in fact the situation for them is actually incredibly unstable right now but the west doesn't know that. Unless they call the bluff and soon (I mean, it's HoI4 so you'll win anyway but still, roleplaying here) then they'll sputter out and fall to internal revolution. I'm amazed Africa hasn't already started.
Yeah, the western world is pretty much weakened. As you said their markets are now only the Commonwealth and the Americas. They don't have access to most of Europe and vital industrial countries like Germany and France anymore. That's part of why I roleplayed the US and later UK embargo to just make it into a large scale tradewar between the two blocs as a whole. And as the communist bloc won't participate in any of the post war economic systems (IMF, World Bank, Bretton Woods etc) the world economy as a whole will be much weaker and slower to recover. This again hurt the US and UK, while it also hurt the communists but I guess they can handle dissent in other ways the western powers can't.. But who knows, perhaps the UK turn very benevolent and spend most of their budgets to build up Africa

I highly doubt that, I can also see it would lead to public outrage if funds were used to build up the economy in Africa and not in Britain.
And yeah Russia is indeed unstable. And so is the communist world. Afterall most of these nations fell to communism through coups and fear. Now if there becomes a power struggle in the USSR that might very well lead to its breakdown, or if the economy plummet. And let us say the world turn into a WW3 and the communists manage to conquer Britain, I believe it would lead to an armistice of some sort. Like USSR and her allies wouldn't really be able to invade the US and the other way around. And if the US got the bomb they might just use it and then sue for peace. My best guesstimate at the moment is that such a world would lead to a communist Europe, with a liberal-democracy/US dominated Americas. Perhaps Africa and Asia would be subjected to Proxy wars, but I think it would essentially become a Cold War between all of America and all of Europe where the two sides are much more evenly matched. That of course depend on how the world develop in meantime.
That is my thoughts on it, and I am more than welcome to other opinions and also suggestions on what is likely (granted, this entire scenario isn't likely at all, Trotsky coming to power etc) to happen and so on.
I also suspect that after the Southern Thrust or into 1945 at some point there will be another Congress to outline the general development of the world and the communist strategic goals.