Problem is that the papal states, until 1500's, were more a federation of almost autonomous commons, with no real foreign policy and always infighting.
By 1500 the state was reorganized and became a "real" nation, but by then its neighbours were by far stronger than it. Also the popes's mindset was to spend its resources on its own expensive court and to help catholics around europe, not to expand in italy.
One way could be an italian federation ruled by the pope, as it was suggested by Gioberti in 1800's.