Yeah, i´ve seen the same (quite disturbing) things happen in a game against Xwormwood. I agree, that there should be a at least a decision event, giving a choice, where the forces should be deployed.
In general it is a very unsatisfying solution, to kick all forces out of the surrendering country by the game engine: in my game, the russians were on their way for an powerfull offensive into southern/eastern german belly - and on the next term they went on a vaccation to serbia and russia - well - good luck for the germans, but a bit broken in game terms.
I think it is a fundamential point, that to surrender - your opponent must accept your surrender. It is not ok, that the LOOSING country expells all enemy forces just by loosing. in this game, there are decision events for many occasions (which i like alot) so why not a decision event: Accept the surrender or not. if it is accepted, the forces will be handled as mentioned above, if not the war goes on normal, and the event "accept surrender" will plop up again in the next turn....