Ireland was still considered a component of the UK that's why the Treaty's have some of the legacies that they have, changing them would have major impacts on the UK as well (you are talking about a significant forced population movement that would have widespread affects on both Ireland and the UK).
Ireland through those 10 years were actually opening their own Embassies (from memory the first Commonwealth nation to have an Embassy in the US for example).
In terms of 1949, I'm not sure what you think that Ireland got from the UK when we left the Commonwealth, in fact the other Commonwealth nations and a portion of the UK were firmly supporting the conclusion that happened (besides by 1949 Ireland was for all intents out of the Commonwealth).
During the period between 1921 and 1949 Ireland engaged in a trade war with the UK, and faced significant trade restrictions (both in carrying hulls and access to resources) during WW2. Given how interconnected the Anglo-Irish economies are I'm not sure how you would create a situation that would make things worse.
I think that the point of the post was wild speculation on creating a European failed state, not a real world scenario. Of course, Ireland was a Dominion from 1921 to 1949 and thus benefited from common citizenship, but maybe a Republic was immediately accepted and Ireland cut free. With the pressures of unemployment and depression, imagine an ejection of Irishmen and women on the lines of population transfer in the break up of the Austro-Hungarian Empire.
I believe that the trade war was sparked by the Dail's refusal to honour land annuity debt and a patriotic insistence on taxing British goods. A spiteful Britain could have made things even worse than the retaliatory tariffs, imagine a full economic blockade not just a high tariff imposition. As Ireland was in currency union, once the store of sterling in Ireland had been used up, where would they get currency for imports? As it was in the real world, there was essentially a barter economy through the 1930s, but the Irish Government could still call on the BoE for hard currency funds.
Regarding diplomatic representation, the new Irish State was given facilities at British embassies (pre-1949) until they established their own infrastructure--the world is bigger than the USA.
After 1949 when Ireland was out of the Commonwealth, it still enjoyed free movement of labour and preferential tariffs. The scenario is to create a failed state--the idea is that one could have been created in post independence Ireland quite easily.