Democracy is basically a voluntary handicap. I mean, if you just want to tear stuff up and take over the world, there's no reason not to go fascist or communist, but HOI4 is an open ended game and often its more fun to follow the historical path or to roleplay the good guys (or the "good" guys).
The other big issue with democracy is that the concept of victory becomes a bit more collective, and since the allies have a lot of big hitters on their team (and the Axis AI still has some issues) they will usually tend to win, making the player's involvement seem less significant. I'd imagine as the Axis is tuned up to be more of a threat in the hands of the AI and alternative national focus paths are added to the majors (creating the possibility for different and more challenging scenarios like the USA staying neutral or Britain pursuing appeasement further than in history) things will get a bit more exciting.