Well, I changed up the EnglishNames.cfg in my
other GWX install and did a test patrol. Here's what I sank by ship class, along with the ShipNames class used for name/cargo (if any), the Allied/Axis/neutral designation, and nationality based on visual ID:
M03X
unnamed
neutral
no flags/markings
M27B
M27B
Allied
British
Granville-type Freighter/GRA
GRA
Allied
British
M07X
unnamed
Allied
no flags/markings
Medium Cargo/KLS
C2 (KLS=C2 per ClassMap)
neutral
American
M15B
M15B
Allied
British
M14X
unnamed
Allied
British
M20B
M20B
Allied
British
M01X
unnamed
Allied
no flags/markings
M37B
M37B
Allied
British
M34X
unnamed
Allied
Swedish
I can confirm the enemy/friendly/neutral status of these ships was exactly as noted above since I was using Contact Color and the Allied ships were all red icons on the map while the two neutral ships were green. My tonnage totals at the end of the patrol also confirm that everything I listed as Allied was counted as enemy tonnage while the two "green" ships were counted as neutral.
I used the external cams to do a thorough 360
° sweep around all the ships before attacking, and can say without a shadow of a doubt that those listed as British were flying the Red Ensign of the British Merchant Navy. Three of the M**X ships had no flags or markings of any kind, and IIRC two of them were spotted or attacked at night and were running without lights. The American ship was running lit and had her US flag spotlighted, so no doubts about her.
Of particular interest was the final ship, by class an M**X "neutral" that spawned with Swedish flags and markings (as seen in the file data\Sea\M34X\M34X_T01.tga) but the game gave her a red icon and counted her among the Allied tonnage sunk. She was heading ENE in grid BF17, presumably heading for the Irish Channel; in theory I assume this could've meant a destination of either an enemy UK port, or a neutral Irish one. It was daylight so her being lit/unlit was not a factor. If this had been a "real" patrol (and I hadn't been shown a red icon on the map) I don't know if I would've attacked her since I think her status as an enemy ship might have been debatable.
If nothing else I think the use of the MFM mod will be the nail in the coffin of the Contact Color mod for me, as much as I hate to give that up.

Pushing me ever closer to more realism, which I don't mind really. Having it enabled sort of defeats the purpose of using a mod like the MFM, which requires you to make difficult decisions about whether or not to attack a ship that may or may
not be a legit target regardless of its flags/markings or lack thereof. But that would also mean losing the navigational "tails" on my ship icons, which would be really tough at this point. I wonder if there's a way to keep just those and not have the color coding.
For me personally, like Damo, it will probably also mean doing something with the ShipNames file to provide names for all those M**X classes, since it's clear that they are going to show up not just as potentially legit targets but as
obviously legit ones (the M14X I sank was most definitely flying a British flag).
Sadly, all of the above does nothing to explain why several of the ships I sank in my last "real" patrol got names from the ShipNames list for M01A ships when I know they were flying enemy flags. British or Canadian (and I still believe they were British, as there was nothing on them to indicate otherwise, but whatever - GWX shows Canada as Allied starting Sept 3) they were still enemy ships sunk in Sept 1939 and therefore not American. And class M01A is not in the British, Canadian or any other UK/Commonwealth rosters I checked. So where that's concerned, I still got nothin'.