They probably grab the opportunity to conquer Albania and Greece anyway, and still fail with the latter. But I don't know what they'll do afterwards - sue for a humiliating peace, or fight on?
Anyway, I don't think there's a way to completely keep Italy out of the war. Italy was gearing for war for a really long while, and it's too important an international power to just stand aside (unlike Spain), and Mussolini always had pretensions of building a greater empire through a massive war. I think the most you can have is that, at some point, Mussolini gets upset at Hitler and decides break the Pact of Steel. There were many opportunities for this, even before the pact was signed. For example, in Austria in 1934. According to Galeazzo Ciano's diaries, Mussolini didn't like Hitler and mistrusted him for a very long time, seeing him as a real danger, and there actually were a lot of instances in which German foreign policy violated Italian interests (Anschluss of Austria, almost going to war over the Sudatenland, starting the war before Italy was prepared even though Hitler promised not to do that...). So I think that you can have Italy stay out if Mussolini was a more reasonable person (a huge POD by itself), listened to his advisors who wanted him to keep away from Hitler, realized Hitler was bluffing him, and that Italy's chances in such a war aren't too bright, he would not declare war on France. However, I don't think he would stay out of the war entirely. I think he'll join in at the allied side when it became clear Germany was losing, just to stop the Soviets\take part in the spoils of war.
Anyway, as for what it means for the war itself - I'd love to be corrected on this, but IMO the entire Mediterranean theater had little strategic value, and even less tactical value, and the troops that had to be diverted in order to keep Italy from being instantly occupied wouldn't have helped much in the Eastern front anyway, maybe stall the Soviets for a few more weeks but that's all. Italy would have surrendered or be overrun quickly anyway if the Allies decided to cancel Sicily in order to bring D-Day closer. This means that the allies might be forced to stay on the continent for longer in order to defeat Italy, but since D-Day is earlier the war ends at essentially the same time. If Italy stays out of the war entirely, then that means the Western allies have a freer hand planning D-Day, maybe bringing the war's end two or three months early. But not much more, as the troops both sides had to divert in order to take\keep Italy from falling would not have been a game changer if deployed elsewhere.
As for longer-term consequences, that's more interesting. I think Fascism still remains a discredited ideology as it still fails to deliver its promised Italian empire and in addition German fascism (AKA Nazism) also fails entirely, and the big winners are still Western Liberalism and Soviet Communism, but Fascism doesn't carry the bad name it generally does today and Fascist politics are still in the mainstream.
As the rest of the world decolonizes following the war, Italy still holds on to its colonies, and becomes essentially like OTL's Portugal, engaging in brutal guerilla war against Communist rebels in Africa, becoming almost a pariah as a result of its cruel reaction to the rebellions (IOTL Italy killed around 20% of Libyans when they revolted in the 20's, and during the Abyssinian war it used poison gas to slaughter entire Ethiopian villages). Eventually, as the situation in the colonies and Mussolini's health deteriorate, Italy gives up its empire and either through a revolution, or through perestroika-style reforms become a normal European parliamentary democracy, with the only difference is that it still has a king, a vibrant PNF and holds on to Istria and Zadar.