If Henry VIII had died in 1521, Queen Catherine of Aragon would have most likely been made regent and guardian of Mary. There would have probably been a regency council made up of the dukes of Suffolk and Norfolk and Cardinal Wolsey. The regency council could act as a brake on the regent’s power with some acts of the royal prerogative requiring a majority vote of the council. In OTL, Henry Fitzroy was not made duke of Richmond until 1525, so in TTL, he may just be a bastard son of a dead king with no powerbase to challenge Mary.
Margaret, Queen of Scots would probably not contest her niece Mary’s right to the throne. Margaret couldn’t have challenged Mary’s right to the throne without using arguments that could threaten her own claim to the throne. In 1521, Margaret was having a difficult time maintaining her position in Scotland, so she lacked a powerbase to challenge Mary. Margaret would probably focus on the possibility of her son, James V of Scotland, marrying Mary. In OTL, Mary, Duchess of Suffolk, had a good relationship with Catherine of Aragon. She even opposed her brother’s attempt to obtain an annulment of his marriage to Catherine. Henry VIII named Queen Mary I after his sister. So I suspect that in TTL, Mary would be loyal to her niece and namesake. Mary would be content with her husband sitting on the regency council and focus on forming a powerbase in the event of Queen Mary’s death. If Queen Mary were to die without issue, it would be fascinating to see if Mary would recognize her older sister Margaret’s claim to the throne.
The question of whom Queen Mary would marry in TTL looms large. She was betrothed to the Dauphin in OTL but I doubt she would marry him in TTL. The regency council would not support the personal union of France and England. Another possible husband would be James V of Scotland. Margaret would love the idea James marrying Mary but the regent of Scotland, the duke of Albany, would want a French match for James. The French court would do everything in its power to maintain its alliance with Scotland and prevent the marriage of James to Mary. Catherine of Aragon would want her daughter to marry Emperor Charles V. In TTL, I could easily see Charles ending his marriage negotiations with Portugal in order obtain the throne of England. A dowry of England would be too tempting to ignore. Wolsey would campaign for the Dauphin, but I suspect that Charles would use plenty of bribes to convince Norfolk and Suffolk to betroth Mary to Charles. Charles could sign a marriage treaty to Mary limiting his powers as king of England with terms similar to what his son Philip II signed in OTL. Charles could agree to leave the Netherlands to a second son of the couple with that son also inheriting England upon Mary’s death.
The future of Catholicism in England would be brighter in TTL. Mary and Catherine of Aragon were both devout Catholics and they would have done everything in their power to preserve the religion in England. Queen Mary, in TTL, would have been raised in a happier environment than in OTL, and would have had a more peaceful reign than she did in OTL.