Where is all my drabble going with this? Well while I expect the crack Italian units to do reasonably well the rest of the Italian forces are IMO going to be extremely useless outside Italy (and even there not be all that well positioned if the Germans get into the Po River valley and plain).
Agreed. The Italian army is going to have some serious problems, and that will become clearer later on. That said, I think that the main effect of these weaknesses will be to preclude any effective Italian offensive, rather then to cause their lines to crack- Austria is very good defensive terrain, especially because of the spring weather as LordKalvan points out. I don't disagree at all on your summary of Italian military prowess, but I do think that the situation is enough to cancel many of Germany's advantages- although obviously not the superiority of German leadership.
There's also the air war to consider, which I think it'll be something of a mixed bag. While the Luftwaffe will generally boast superior planes (generally... ITTL the Luftwaffe won't have discovered that the He51 isn't an effective fighter, and the Me109 will be woefully undergunned) the Germans haven't had the advantage of involvement in Spain, so they'll be making many of the mistakes the Condor Legion made in OTL. The Italians have the benefit of experience in both Spain and Abysinnia which will help them, although in general techniques on both sides will not be advanced as in 1938 in OTL. Both sides are going to be bombing each other though, with a lot of success. German He111s are going to cause huge problems for the Italians over Milan and the Po Valley, as much as anything because the Regia Aeronautica's CR.32s can't catch them. This will become less of an issue when the RAF turns up, but until then all the Italians can do is to rush the new CR.42 into production. German bombing of Italy is definitely going to be reciprocated though- I expect the Luftwaffe will find Italian SM.79s as much of a pain as the Allies did in OTL. Munich, Nuremburg and even places like Frankfurt will have to watch out.
It's also worth pointing out that the German army isn't quite as effective as OTL. The troop movements made into Austria OTL uncovered a whole range of logistical problems that will still happen ITTL, only in a wartime situation. on top of this the Germans don't have the advantage of Czech weaponry that they looted in time for the invasion of Poland, as well as the lessons leant in Spain, as I already mentioned. The Germans are harrassed by Heimatschutz behind the lines (something that will be expanded upon in the next installment) which diverts resources from the battlefield and means German troops are tied down in anti-guerilla operations. None of this will stop them advancing, but it will mean that the advance is slowed enough to enable the defenders to entrench themselves.
On a slightly longer term basis, factors like war production need to be looked at as well. In OTL, the Italian declaration of war cut it off from foreign trade- IIRC in 1940 more then half of the Italian merchant navy was abroad at the time and was interned on the spot. None of this is going to happen ITTL, indeed Italy is going to have the advantage of being supported by the British and French economies while still being able to import things from neutrals like the US. Plus, it's not cut off from it's colonies. This is a long term advantage and won't be apparent immediately, but will mean that over time Italian troops will become far better equipped even if it's with British and French cast-offs.
(how many are in Italy btw and not spread out to the colonies?)
The majority of Italian troops are in Italy or Albania- Abysinnia isn't occupied like OTL so a garrison isn't needed there, and Italy's other colonies don't need large defence forces as both Britain and France are friendly powers. There are a few divisions stationed in Spain left over from the intervention, but nothing major. ITTL Italy's military focus has been firmly placed across the Alps for several years.
Fair enough but why is Germany not shifting its own armored forces to help their allies in Yugoslavia (and they should get there way before the British can mobilize and ship theirs there, especially since the British government spent so much time waffling around)? For that matter do the British even have the on-hand transport capacity to move that many divisions (transports the British have but how quickly were they mobilized and were they in port at the time of the declaration of war to be quickly grabbed up to be used) quickly?
Germany can't shift ground forces to Yugolsavia until it secures a land route to the border- as long as Graz holds out then the Italians don't have to worry about German units cropping up in Slovenia. Air support is another matter, and I imagine elements of the Luftwaffe will be flying south quite quickly, if only for the fact that bases in Croatia will allow the bombing of southern and central Italy. This will be something of a relief for the Yugoslavians, who will be facing complete defeat in the air at the hands of the Regia Aeronautica.
Granted they have to keep an eye on France but if they are not going on the offensive into France (and certaintly not the low countries) a mobile reserve is all that is needed there.
Agreed. Hitler is convinced that the French will not be taking offensive action in that theatre, and by and large he's right. Also, bear in mind that with Poland and Czechoslovkia independent and potentially hostile, the Wehrmacht has to guard the east as well. This will provide another strain on resources as well as providing a nightmare for OKW planners.
A couple more things to keep in mind is it takes a while to ship an entire army (unless you are sending them across France but expect the French army to complain loudly about the Brits tying up their rail lines if you chose to go that route which should delay any French engagements into Germany) so the air support the British can send to Italy will be the biggest help initially (although how much do the British dare strip of their own air defenses?).
Yes, it does- although in this case the later British entry helps with things. By the time the BEF arrives in France a lot of the troop movements attendant to French mobilisation have already taken place, so transport is less of a problem- the French section of the BEF won't have far to move from it's arrival point in the pas de Calais, so only the section bound for the Alps (I'm thinking the initial force would be one of the three corps that comprised the BEF in OTL) will require use of the French rail infrastructure. As a side note, thanks to Mosely's re-armament plan and his championing of his good friend JFC Fuller, the British Army is considerably more mobile then OTL- so if neccesary, British troops will be able to take a certain amount of responsiblity for their own transport. Obviously this isn't ideal and would be far slower then using the French rail network, but may speed things up slightly.
It's also worth pointing out that the French Armee des Alpes will be making it's way east around the same time- while the French don't want to be making any moves along the German border I imagine that they'd be happy to send a couple of corps of specialised Alpine troops to help the Italians.
On the air support front, I agree completely- the Italians will be begging the British for Hurricanes to take down the He111s they can't catch. The British won't be able to make too big a committment at first, but problem of stripping air defences is less of a concern then OTL as the RAF is larger and more self-confident, with projects such as Radar and jet engines being further along thanks to extra funding.
To be honest I expect the Germans and Yugoslavs to be into the Po River valley by the time a large enough concentration of British forces arrive in Italy to help the Italians to any extent (air power can only help so much and I doubt the British in 1938 has the power of say the US 8th AF during 1944/45 OTL)
I can see where you're coming from and agree on the relative weakness of Italian forces, but I think you rather underestimate the advantage that the Austrian terrain gives the defenders. The Alps are bloody difficult to push through- it was one of the reasons that Churchill's plan to land in Istria and drive to Vienna never materialised OTL. Now, this may not be a problem if the Yugoslavians can drive towards Veneto and threaten the Italian rear, but I don't think they'd be capable of doing this- my own feeling is that absent significant support by their Allies, neither the Italians nor the Yugoslavians can really do much in the theatre apart from stopping the other from advancing.
Oh one last thought how are Italy's allies in Austria going to react to their rounding up of the German population in southern Tyrol?
Reaction to this is rather mixed. Frankly, at this point in time the Austrians have more important things to worry about, and in any case the government has always disavowed any suggestion that they might want to retake Sudtyrol. From what I can see the agitation in the region was of a pan-german not pro-Austrian character, so Starhemberg doesn't mind all that much. That said, the internment of the South Tyrolese will be a useful propaganda stick for the Germans to beat the Austrians with. It's also worth pointing out that at this point it's not clear that the South Tyrolese won't be coming back- so far they've only been interned for the duration.