Complete and utter disaster?
Ireland couldn't be kept neutral, disarmed, and in any way united or independent as a polity. It isn't switzerland, where they are neutral with an army to back them up and mountains to assist. They aren't right in the middle of any territory that would considered essential to national defence for either France, Germany, or Italy (or their ATL equivalents)
Ireland however is right in the middle of British shipping lanes, if disarmed and neutral, is likely to be invaded by someone else to provide a base at the first opportunity by a rival to Britain. Ireland is in the perfect position to raid, and pirate across the Irish Sea, making it vastly costly NOT to control Ireland, because you have to pay to protect it from piracy.
I can't see WHY the British would do this. Especially since Ireland was conquered by the Tudors! If the PoD is to leave Ireland independent, then you need to explain why they give up so much territory so much earlier. It certainly isn't vogue at this point in history to do such things.