1. Yes, allying is just selecting a unit of a different player and pressing "a".
2. Yes, Nod is badguy, but as I already said, that secondary colour is disabled altogether in multiplay. It has always been like that, and I didn't change it. Also, the side recolouring logics I made are simply not used in multiplayer, as far as I know. I could enable them, but at the moment they aren't.
3. Yes, though I added a rules.ini option that disables this. Since AIs have the tendency to always attack the most northern unit or structure, this isn't too spectacular though, since they just murder eachother starting with the most northern player, until you are (or any of your co-players is) the most northern player.
4. Neutral? Not sure... I don't know if alliances are actually read from the ini in multiplay.