You are referring to this by DR, who is one of the devs (they don't show as dev posts when converted from old forum software):
Civilian IC is used to build IC etc, and yes, you can convert industry to other types.
I took that to mean that civilian factories can convert to military factories and vice-versa.
There is no such thing as civilian dockyards, unless you count convoy ships.
The reason you give, both SOV and GER not bothering to create navies and using all of the IC to build tanks and planes, is surely the reason why there is this split?
It's not realistic to imagine that all of the IC in a place like Glasgow could be used flexibly to build a CV or 500 tanks, as earlier versions allowed. And verging on gamey that countries with significant coastal cities and overseas trade, could in effect scrap their navy. It's not just the idea that the naval commanders would be upset by this (and that makes it impossible in Japan for instance) but capital ships are a very visible statement of power projection. Even if we know with hindsight that battleships were becoming obsolete because of air power, this was not public perception, or even the perception of the naval planners in 1936.
If dockyards can be converted to military factories then it should be slow to do it, and at say 50% efficiency, so you get 1 military factory out of 2 naval dockyards.
But there should be a penalty for not building a navy, or a bonus for doing so. There could be an NU hit, especially for cancelling any ships which are already being produced in 1936. But launching a capital ship could get some PP. In the sense that it is launched with much fanfare and public interest.
And although there is no training of ships as such, and therefore no obvious way to gain naval experience points other than combat, then perhaps you could get some points just from producing new ships. This makes sense to me if the final stages of producing a new ship include sea trials / crew training. You will learn something when you get your new CV that can help develop a new variant of CV. Otherwise, it seems to me that it will be very hard to produce variants of ships, and every country will have the same spec just with different flavour names. You could see this in one of the videos where Italy went to war with Ethiopia, then Yugoslavia, then invaded France, without ever gaining any naval experience points.
In an historical game, Japan is going to gain a tiny amount of points from fighting the Chinese navy, but UK gets none before 1939 and USA none before 1942. That doesn't seem realistic.
Without the Intel system then I'm not clear how it would be discovered. But if SOV fails to invest in an adequate navy then Germany should do amphibious landings against the Baltic States.