Either way, the end of WW1 in OTL was such a mess with things like Sykes-Picot and the attempt to give Greece the parts of mainland Turkey that at the time had sizable Greek communities, that I find this ATL act of bad decision making 100% plausible.
I'm not arguing that it would be a bad decision that would ultimately blow up in unexpected ways.
I'm arguing against
this specific bad decision.
I agree that A-H would want to screw over Italy. I agree that Italy would be humiliated under such a peace deal, and that it could break up in a civil war. I just don't agree that A-H would chose to forcibly decentralise Italy in such a manner.
This is a monarchy effectively toppling another monarchy, just to be a dick. Not because the monarch that has been toppled is a bad monarch, not because another "more legitimate" monarch should replace them. Just because of general dickishness. Not to mention the repercussions that could have on A-H itself. If the government topples a foreign monarchy, why should people respect their own?
Australasia’s formation doesn’t make much sense
I agree with this. I don't know why New Zealand just suddenly decided to join with Australia.
If it was the result of a long event chain, which required a particular combination of focuses, and good relations between Australia and New Zealand, sure, why not.
Otherwise, I would have Australia and New Zealand be separate.
India’s current setup also seems rather suspect
Communist India seems ok to me.
However, the rump Raj and the Princely Federation especially, I agree with.
Having
some kind of rump Raj, ok, fine, I can live with that. But I don't know if the northwest of India would be the
most realistic place for it.
Having several independent Rajas, on the other hand, I could see. They could try to play off competing factions to maintain independence, and possibly ally with each other. Hyderabad, Mysore, Kashmir, Travancore and Kalat would be possible.
Adding a
nationalist India would be interesting. They would have to deal with competing interests from Princes, Hindus and Muslims, with a long, meandering focus tree, with many choices for the player/AI to make. Will it become dominated by Hindu nationalists? Will the Muslims form their own state? Can a balance be struck? What place will the Rajas have within this? I could also see them seeking aid from the Japanese, or the Germans.