What is your term for "defeated"? when a player loses all his land and armies? because a player could bring back another player by trading a prov or units. So in all this feature wouldn't be practical.
from what Golden Frieeza has stated even after you lose your armies and land you can still return. with that players would exploit it, as a ally dies the game speeds up then revive the nation then the game slows back down. as i have stated before this feature is not practical. if you want to play a faster game there are speed events to play with faster speeds.
Trade with "dead" players should be disabled. Common sense.
Many nations had a 'government in exile" during WWI and WWII. To my personally but that's out of a RP perspective trading units like that might represent such government in exile. However for this particular event they could disable it .