Real life is a good example of neutral factions, as there are very few good or evil factions involved. Real world also doesn't have the same fixed good-evil morality that CF world has. As for your WW2 example, allies(neutral faction, the attacker was Soviet Union) did attack Finland(neutral faction), so we had to ally with the Germans(neutral faction) to fight them. Both allied and German troops committed horrible atrocities in that war. Neither faction was mean for the sake of being mean, they just worked for what they thought was the better world.

As for neutral itself, it is not one team, but rather, many teams. It's true that like Nep(Nepenthe aka Drokalanatym aka Daevryn. Yes Nep, you are so complicated that I felt that I have to explain you :P) said, some neutrals are concerned about alignment, but this is not the case with all neutrals.

I agree with Tiatan that this has stopped to be newbie question. There was some discussion in Depoetsoende goodbye thread about what good align is, so this thread came in rather convenient moment and could have diverged to a larger one on Gameplay.