Very interesting turn of events...!
I think the problem with the Neutrals is: they are too strong!
Code:
Nation Cities Land Population
Neutrals 59 1823 449
Ottoman Empire 34 1116 326
French Empire 31 684 302
Austria-Hungary 26 427 209
British Empire 25 679 215
German Empire 25 321 270
Italy 19 502 199
As you see, they have twice as many cities and three times as much land as almost anyone else. This probably explains, why they demand tribute and then declare war...
Are you sure you set the agression level to lowest?
Only Russia is stronger:
Code:
Nation Cities Land Population
Russian Empire 68 2550 491
Therefore I'm really puzzled, why they now declared on Russia?!
BTW, what is the difficulty level? The game says "Major", whatever that means... I hope it's something like Regent or lower, because otherwise they will be producing millions of units. (They have outdated units, but these are cheap to produce. Now imagine a Deity production bonus of 40%, and these 59 cities will be cranking out units like crazy, which will pillage everything (because they are too weak to attack, but quite ok on the defensive, so the AI will use them for pillaging)!
The mutual protection pact makes it difficult, maybe even impossible to sign peace now: let's assume at some point I'm able to make peace as the Austrians. But before the next Ottoman turn comes around, so that the Ottomans can make peace as well (if the Neutrals are willing to talk at all), the Neutrals may attack an Ottoman unit, which draws Austria right back into the war...!

I will need to wait until the Neutrals are willing to talk to all three of my countries and then sign peace in the order Ottomans -> Austria -> Germany.
I don't know, what the Western Allies should do. A RoP with the Neutrals would in any case be too unfair! That's like having a second Russia on your side! But if you declare war as well, it will become even more difficult to ever get back to "normal"...
Let's play one more turn and try out, how many forces the war with the Neutrals really binds. If it's a significant part, then probably you should also declare war on them, so we all have the same disadvantage.
Lanzelot