It won't turn into an all-out war, especially if we use the 1934 window for this exact thing to happen.
One side has a modern airforce (one forgets Italian achivements in aviation in the Interwar Era), a fully-equipped army, and the other doesn't.
Italian victory is assured, how much of a victory is up for debate. Allies will support Mussolini because at that point he will have proven that he has the willigness to muscle around Hitler that doesn't exist in London and Paris.
Anschluss falls through and Austria becomes a reluctant Italian client-state.
And at some point Stalin likely uses the distraction as an opportunity to force the Soviets onto the Baltic States.