Reddings Guide indeed says its illegal participation. Sorry it took so long to drag it out. Haven't had it with me.
Pg. 135: Wrong Side of Neutral Zone-No Participation
"Encroachment restrictions apply only to players and not to substitutes or replaced players. A team member who is entering the field to fill a player vacancy (when the team has less than 11 players on the field) must be on his team's side of the neutral zone prior to the snap or free kick. If the snap or free kick occurs while such a team member is on his opponent's side of the neutral zone he is considered to be a substitute, not a player. As a result (1) If he does not participate, it is a live-ball foul for Illegal Substitution simultaneous with the snap (previous spot enforcement), a five yard penalty (3-7-5); or (2) if he participates in any way by hindering an opponent, drawing coverage or touching the ball, it is a live-ball foul for illegal participation(9-6-3)"
Pg 138 "Example 10-24 Second and ten on Team B's 20 yard line. As Team A leaves their huddle and comes to the line, Team B realizes they have only 10 players on the field. B31 then enters the field and is on Team B's 25 yard line when the ball is snapped. During the play B31 (a) begins to participate while on Team A's side of the neutral zone, (b) doesn't begin to participate until he is on his side of the neutral zone, or (c) simply continues to run towards his side of the neutral zone but doesn't participate at all in the play.
Ruling In (a) and (b), because B31 participated, he is guilty of illegal participation, a 15 yard live-ball foul. In (c), B31 is flagged for a live-ball, five yard foul for illegal substitution because he was on the wrong side of the neutral zone at the snap and didn't participate in the play."