The Confederate States is only playable if you have taken over the USA all ready. Further, if you manipulate the game play some, and jump from nation to nation while playing, you can make it so the U.S. is not able to fight back in the game, which means you can use the Confederate States in the 1930's. So long as you get any South or Central American nation to Invade the U.S., and play as the U.S. and manipulate them so that they do not have any defenses. (Which can be done by saving the game, going and choosing that save, and then choosing the U.S. as the nation to play with. (Dirty ,I know, but its fun playing as them, or whoever else you so please from the three nations you are able to create from the U.S.A. And yes, this is performed outside of the Armageddon version of the game. This can be done in the normal Hearts Of Iron II game play. Just requires some cheating.
They hold Territory from Texas, all the way to the East coast. As far south as Miami, and as North as Richmond. This is only so if you have not liberated Texas first. If you did, then a large portion of the Confederate States belong to Texas.
My strategy for the confederates consists of building the nation a military, and industry sense they start with close to nothing. Once you build them up though, they are pretty tough. If you take over Mexico, i've found that it helps with IC, which the Confeds desperately need in the game.
It's also worth noting, that after this the game dynamics change a little bit. If you leave the U.S. as a nation in the Northern part of its former land, it wont participate in any major events and will be close to useless.It also doesn't join the Allies, it just stays an isolationist. Also, for some reason Japan never invades Asia or joins the Axis. Also, if you leave California or Texas to their own devices, they have the ability to become pretty tough and a pain in the but to deal with later on.
Note: You guys can alter this however you want of course, I just added this because it is a nation in the normal game play.