I don't want to have a long protracted discussion over semantics - so I'll go straight to my point. The "sunburn" effect - whereby water droplets, standing on leaves, causes the leaf to burn locally - is a myth, pure and simple. That does not happen. Even good sense should tell us this, as if it were true, no plants would grow in the tropics. Nevertheless, some enjoyable reading:
Some sage old sayings are based on facts – others are not worth the bother, writes James Wong
www.theguardian.com
Optical physics provides the antidote to a gardening myth
www.americanscientist.org
Now if neem isn't causing sunburn to the leaves, what is going on? "Phyotoxicity" isn't my definition.
https://www.sciencedirect.com/topics/agricultural-and-biological-sciences/phytotoxicity
Phytotoxicity is defined as a delay of seed germination, inhibition of plant growth or
any adverse effect on plants caused by
specific substances (phytotoxins)
or growing conditions (REAL CCS, 2014).
From:
Soilless Culture (Second Edition), 2019
With the basic definition of phytotoxicity out of the way, does it matter, than, what the exact interaction of Neem oil is, with the surface of a leaf? There are multitudes of stories of neem users experiencing plant burn. Do we ignore that, for the sake of a good argument? Or do we defer to those who have good luck with using neem the long prescribed way - which is applying after sundown?
Nevertheless, even those who sell neem products tell us to be careful. Shift for a second, from "phytotoxicity", to "phototoxicity" (which is arguably what we're really after here:
Scale insect infestation can be devastating to your plants. Learn all about scale control methods such as neem oil here.
www.saferbrand.com
Use all neem oil products by following the instructions since, as an oil, there is
greater risk of phototoxicity (burning).
Even if you don't think it's true, or lament the fact that nobody has spent millions of dollars on a case study to clarify the point for hobby gardeners - isn't putting 12 hours of daytime between your neem and your plants, a pretty cheap insurance policy?
Neem usage is a deep subject, that's not always black and white, and I don't really feel like entertaining it any longer. My final word on neem, is that it can be the best or worst thing in the world for plants, but know before you go. Specifically, one must exercise the MOST caution with small plants, as the OP has stated is their case. So before using neem, ask a LOT of questions, and listen to people who use it regularly...