Sorry for the previous short reply. I was typing on my phone.
We put forth an idea to remove all formal diplomacy relations, and replace them with fine-grained treaties. You could grant different rights to other realms by signing treaties with them. Passage rights, expelled diplomats, war, conquest, trade, facility sharing, etc. Each was a separate treaty. The information is available on the wiki in the page history, here:
http://wiki.battlemaster.org/index.php?title=Enhanced_Diplomacy&direction=prev&oldid=164722The key part of the treaty system was that treaties had "friction". This was RP'd as a resistance of the minor nobility to the treaty. The longer the treaty was in force, the higher the friction. Diplomats and ambassadors could spend hours to reduce the friction. If the friction ever hit 100%, the treaty was automatically canceled. The intent was as you've stated: All relations tended toward neutrality. Without any effort on the part of the players to maintain good relations, all relations would eventually decay back to neutrality.
The idea of the fine control was, in general, well-received. One big complaint was how many treaties it took to become an "ally". We proposed some "roll up" treaties to cover it, allowing one treaty to include multiple clauses and be signed all as one. The system was removed before we ever implemented this part.
The major problem of the system, though, was the friction. The idea that a treaty would be automatically canceled if it stuck around too long was widely opposed. Players had to spend significant amounts of time investing in maintaining treaties. Boring drudge work. Almost no one thought it was a good idea.
After trialing the system for a while as a "preview" with no game effects, it was decided that the "friction" aspect required way too much work, and was something that no one really wanted. So we rolled back almost all the various types of treaties, and left the free-form text one, with no associated friction, as the only remnant of the system.
