Am I understanding GDI correctly? Currently trying to carry out harmful spy op's on several nations barely larger than mine (nowhere near twice as large) and I am not allowed without declaring war due to GDI. Am I missing something???

it will allow me to perfrom a planned strike, but not an artillery barrage, missle strike or harmful spy op. Also does not give me the option of declaring war in the war room. Is this a bug in the game? please help I am in desperate need for revenge.

The person that you are trying to do harmful ops or special attacks such as GS,BR and AB must 'break' gdi before you can do on them.

'Breaking GDI' means that have to either do minor harmful ops such as bomb banks or raid food stores or doing 2 or more planned strikes/standard strikes on you.

note that if you do special attacks or harmful ops back, you are also breaking GDI thus letting them do the same back to you

GDI prevents you from most hostile spy opertions, AB, GS, BR, and missile strikes unless they have attacked you twice. Declare war doesn't work in primary. Humanitarian range is 4 times the size.