“The neutral bit had to do with not wanting to get punished militarily if they openly backed the Nazis and Britain won.”
Their neutrality was biased towards the British. If German airmen came down in Ireland they were interned for the duration of the war. When Allied airmen came down they were allowed to slip across the border into Northern Ireland.
Curragh Internment Camp held both Allies and Axis personnel. They were both effectively POWs in “neutral” territory.