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The solution to Japan vs China/USSR has to be simple, yet allow some degree of flexibility.

Notes:
-I do not like the idea of USSR not being able to DOW Japan, since this allows Japan to leave Manchuria vacant and unrealistically concentrate on China.
-I do not like the Chinese attack weakness, as in the first few years of war China barely attacks as the nationalists have poor quality.
-A 3:1 border garrison rule may work, but it has to be monitored constantly. Perhaps if USSR has 3:1 advantage, it must be announced at the start of a turn, and Japan has the rest
of that turn to reinforce. If they fail to do so, USSR can attack the following turn This may work but I think its inferior to the below.

House Rules:
1. Make sure that the additional Chinese cities is turned off. This should also slow down US entry and prevent Japan having to play as much 'whack a mole' in China.
2. The USSR cannot choose the 'land option' until at war with Germany. Being restricted to combined moves would be very limiting, especially since Japan can still do full land impulses.
3. As long as USSR at war with Japan, unless already chosen, the USA cannot Pass the War Appropriations Bill, freeze Japanese assets or do the Oil Embargo.

#3 makes sense historically since the USSR, especially with the Molotov-Ribbentrop Pact in effect, was probably as much anathema to the USA as Japan was at the time. It would have been
looked upon as part of a USSR-Germany alliance move(remember that Nomonhan was before the German-USSR pact). One can argue that the Soviets have unfair restrictions on them, but realistically
after the Purges, Winter War and the Wehrmacht's crushing of the French, the last thing Stalin wanted was another war with a major power.

What if war happens anyway?
Both Soviet and Japanese sides should be able to make peace at any time with concessions. Perhaps if one side surrenders, there is a two year mandatory peace and the losing side
must provide 1 BP per turn to the other for those two years (Mandatory). Once done, the USA can again do those US Entry actions. This mandatory peace issue also provides an disincentive
for the USSR to attack, since Japan can now vacate Manchuria (temporarily) to concentrate on China and the west (or just make it that both sides must keep 3 land units in Siberia/Manchuria as
mandatory garrison).

I think this may work. Thoughts?

btw, #2 and #3 only apply if the Soviet Union attacks Japan, not the reverse!

On 1: That doesn't work that way. If the additional cities are turned of, the US effect for taking a Chinese city is higher...

If you look at things at number 3, I don't agree that things will be seen by the US the way you are stating. Remember that it was the Soviet Union which supported the Chinese Nationalists with planes and armament before the US started to get involved in the Chinese war. The Japanese were already frowned upon, due to the continuous infraction against US citizens and interests in China. The USSR had the Molotov-Ribbentrop pact. I think if one would want to refuse the US from taking those options, I believe one should add to this house rule, that the US can take these actions, as soon as the Japanese occupy a Chinese city after the USSR DoW...