Vichy doesn't fit in well with the game's mechanics, and what it comes down to is figuring out a way to make the game feel historical and also be playable.
The situation now is:
1) Northern and Western France are given to Germany, so these areas are annexed, not occupied.
2) Because of the previous point, it is impossible to liberate France. France exists, but some of its provinces have been annexed by Germany. There is no game mechanic to reverse this over than by event, and Paradox has not written the event.
2) European Vichy France is not removable by any means other than annexation.
3) Non-European Vichy France featured in a lot of WWII subtexts, and these would require a lot of event scripting, and Paradox has not done this.
Here is what I think should be done:
1) Northern and Western France should be occupied by Germany (not owned) as a consequence of the Vichy event. It is simple to write this into the event, and allows for French liberation.
2) Some means of dissolving European Vichy and putting it under French ownership and German control should be adopted. I wrote a mod where the trigger was Operation Torch -- if the Americans were in the war, they could make this decision, which would give European Vichy to Germany as suggested, and would give North African Vichy back to France and under American and Italian control. Other triggers should be decided upon -- probably one based upon UK success, one based upon GER/ITA failure, and one based upon the liberation of France (Allies in Paris, but probably Vichy dissolution should be triggered before this), which would do substantially the same thing.
3) Non-European Vichy could be the subject of some additional events. The goal here is to have Vichy territories go back to France naturally, rather than being annexed by other Allied powers as a result of a war against Vichy France. The situation between Vichy and the Allied powers was complex and it will be tricky to make an event sequence that doesn't look wrong.
It is essential that Paradox do this, however. Otherwise you may as well force everyone to play Germany. It is important that when the game takes charge of history, as it does with the Vichy event, that it maintain some responsibility for what comes after. Assuming that game-play mechanics kinks get ironed out of this game, the situation with Vichy is the most obvious and significant problem in the game.
The problem is solvable, but Paradox has to decide to solve it. I will be very disappointed if this is left to modders. The vanilla surrender events are an important part of the game, and attention should be paid to them. Up until now they've gotten almost none, there are hideous bugs in them.