From what I've read from the discussions on this forum Kaiser wanted to annex Saxony but kept Hanover independent, but Bismarck said let's leave Saxony alone annex Hanover and other small states. So OTL annexations happened. If Kaiser has made pressure for the annexation of Saxony, Prussia could have annexed it.
I don't know why Prussia didn't annex Bavarian Pfalz and south Hesse. My guess that Bismarck didn't want to alienate South German states to keep them as an assurance against France. Even during the Luxembourg Crisis in 1867, south German states were reluctant to fight against France.
Army and Kaiser also wanted to annex Austrian Silesia and northern parts of Bohemia but Bismarck was able to dissuade them thanks to the mediating role of Crown Prince.
I think there is a few POD for more Prussian annexations. IOTL, an Austrian tried to assassinate Bismarck but failed. Removing Bismarck in the equation could have lead to a more harsh attitude towards Austria.
Another POD
during war Kaiser and Bismarck nearly hit by an Austrian shell. In this scenario I would prefer that Bismarck and Kaiser injure but survives, this removes Bismarck's interference during peace(but kept him alive and after the war, so he could have continued as prime minister) and gives enough determination to punish Austria.
My favorite and unused POD for a more successful Austrian campaign against Italy during the war. IOTL Austria has a chance the decisively defeat Italy after the Battle of Custoza. According to Wikipedia:
If Austria was able to destroy the Italian Army and invaded Lombardy, Prussia probably would have forced to continue to fight after the Battle of Königgratz. Then pursues the Austrian North Army and destroys it and maybe marched toward Vienna.
I haven't known that there was a Hohenzollern legacy in Ansbach with Bayreuth, good to know that. This made sense for annexing them. Also half of the Franconian population was protestant.
I thought that annexing all of Franconia, but that made the Prussian south border a bit ugly I think. This creates a salient border along through Bavaria. If Prussia has annexed just the Upper and Lower Franconia border would seem nice, OTOH unfortunately for Prussia, their population were Catholic, Middle Franconia was Protestant.
Annexing just Bohemia and Silesia could have happened I think. Annexing all of Bohemia-Moravia would definitely destroy the balance of power in central Europe.
Also, Prussia wouldn't have to want the Catholic and non-German population. Instead imposing a war indemnity would be much better for everyone.