I think the above works well for the land territories. The sea (ships) might need some more consideration if you don’t use any type of ships in port rules. After say France falls I think the loyalty of the fleet should be decided. Maybe something as simple as a dice roll for each ship, or maybe roll for all ships in a sea sz together. Say roll 1-2 Free French, 3-4 Vichy, 5-6 scuttled, or some variation there of. Then the battles would start as the players take their turns. They could fight or retreat.
I would think who ever took Paris (Germany or Italy) would get control of Vichy ships. Just replace them with G/I boats, because they would not ever give them back. The axis should be able to move them. Maybe I’m off base here, but w/o an in port rule, you couldn’t just force them to stay put as you do with ground units. I know that the French scuttled much of their fleet a year after the fall of Paris to keep it out of German hands. I just think that the possibility of some going to the axis existed so should be represented.
As for the Free French ships, you could still allow the French player to control them on their turn, or allow the UK to have temporary control, and blue ships would be considered UK in every way and be moved along with UK ships. If Paris is liberated then any surviving blue ships would be returned to France. I like giving temp control to UK.
I don’t think you would use this rule for all other powers, just France and maybe Italy. I don’t think the loyalties would be in question for the other powers.
You could just leave well enough alone and simply have the entire fleet fight on as we do now. F & I Ships would not change sides, but that’s boring. I want to see the French fleet in turmoil with the chance for the allies to take it out.