I think your description of Sweden's response looks very reasonable.Sweden would see the Red Army on its borders as a direct threat to their existence. Then factor in the historic Swedish community in Finland (ala Mannerheim) and the Swedish speaking Aaland Islands, an autonomous part of what was Finland.
I am thinking that Sweden joins the Axis- well not fully. Rather, Sweden becomes a co-Beligerent Finnish style. As Barbarossa kicks off, the Swedish military coordinates with German war interests, but only in regards to restoring Finland as an independent nation. Restoration of an independent Finland will probably include the seizure of buffer zones of Soviet territory as well.
But, wait, there is more Nordic help coming to Germany.....
Norway already supplied a certain number of Waffen volunteers IOTL. With Finland absorbed and Sweden fighting, the Germans raise an entire plus sized division from Norwegian volunteers ala the Spanish Blue Division.
Ironically, the raising of the Norwegian Blue Division kicked off a civil war of sorts in the German High Command. Himmler, dreaming of a Division of fictionally Aryan ubber warriors of the type he never was, pulled hard for it to be formed as Waffen SS "A" Team division- not the auxiliary team Waffen.
But.... Heer commanders privately countered that a Waffen label would keep a good number of willing Norwegians from joining. In the end, pragmatism won and the Norwegian Division goes "Blue", not "Waffen".
The twist is that the Winter War was over in March 1940 OTL after heroic defence, so a complete soviet victory ITTL is likely to involve earlier breakthrough but will probably finish more or less at the same time if not over in a few weeks.
What does this mean for Norway? OTL Weserubung and allied intervention were early April and Norway hadn't mobilised. Here, it's near certain that Norway would have mobilised in response to Finland's fate, and likely be having very serious conversations with Sweden about mutual support.
Both allies and axis have an interest in supporting Norway, but this creates some interesting potential. Could we have allied-backed neutral Norway in a mutual-support agreement with German-backed neutral Sweden?
The practicalities of supply would favour UK shipping to coastal Norway, while Sweden can best be supported by Germany across the Baltic.
Then, Germany is in a bind.
They have to support Sweden or risk their steel supply, but can't tolerate allied Norway, who they can't easily supply themselves and who are an essential partner for Sweden.
But supporting Sweden and taking Norway requires much more effort than OTL Weserubung, especially if Norway is prepared and doesn't want German invention. They could invade as OTL, but this weakens Sweden's natural ally, and will tie up critical resources - materials, men and planning capacity - that OTL was directed at France. So we could see an unsuccessful or only partially successful alt- Weserubung, followed by a pre-Sickelscnitt [1] attempt on France.
None of this looks good for Germany, or for Scandinavia which would be weakened while bordering an expansionist soviet union, while any potential allies are fighting each other to exhaustion in Belgium and France.
[1] It's not that Sickelschnitt is impossible here, but if planning resources are tied up in supporting Sweden, boosting Romania, arranging an invasion against Norwegian resistance, the chances of it being as well organised and as well-resourced as OTL are much reduced. And given the number of opportunities where it could have been slowed or completely fouled up OTL, that's bad news for Germany. Conversely, tying up allied planning resources with the Scandinavian problem is likely to be a benefit to the allies if it stops Gamelin from thinking about using an army best suited to defence on rash offensives like Breda.