I think that, as Lord Palmerston noted, it is hard to say that the Confederacy didn't fulfill all the practical requirements of a sovereign state. They had a working government with a functioning executive and legislature; they had an army and a navy.
But even if that is true, that doesn't mean that it wasn't a civil war. The connections between the two combatants, at every level, were close in a way that is not characteristic of any other war between nations. Brothers fought brothers.
I would contest they had a fully functioning government. For instance, they never were able to establish the Supreme Court of the CSA; they were unable to defend their own claimed borders; they continually lost territory they claimed, and lost it from the very beginning, and were not ever in control of the governments of two of their constituent states; they never achieved diplomatic recognition, outside of the doubtful claims of recognition by the papal state and an insignificant duchy in central Europe.
The confederacy never met essential attributes of nationhood - they were, at best, an unsuccessful separatist movement.
And Lord Palmerston was in the minority of the British Cabinet, at that time, on that issue.