It can work however way the devs want it to work
So in this scenario:
1. Both parties are not at war. If either attacks the other, you can't gain VP and there are no bonus or penalty effects.
2. One party declares war, war is not accepted by the other. The first party gains a 20% attack bonus. The other party has to fight harder to stay alive but cannot lose VP.
3. One party declares war and this is accepted by the other. They can now take VP in attacks by destroying pop (or whatever we come up with). But there's no 20% attack bonus.
Maybe you could make it so that the 20% attack bonus works only against kings and dukes. In that case it doesn't make govs more reliant on kings. In fact it makes the kings more reliant on the govs.
I'm in favor of restaing #3 so that if both parties have declared war, then both parties gain a 20% attack bonus. Although it is a fair bonus, the balance will be shifted in favor of destroying each other. Both parties will have more to gain by going on the offensive and attacking each other rather than by forting up and playing the defensive game. If it ends in a stalemate, it is only because both parties have run out of offensive troops.
I also like 50 Calibre's idea that king who feels like he is losing can initiate either a "surrender", or a "coming to terms" that will end the war between them, at the cost of victory points to the losing king. This is an important component to this whole proposition. If neither king surrenders, they are in a perpetual state of war...
An interesting twist could involve confederates... when my king goes to war, would it drag our confederates into the war also? If you didn't want to go this route, it might be better to just do away with confederacies altogether, honestly...