Winning at Crete, in any fashion, would do for British morale what Gettysburg did for Union morale in the American civil war.
Sure, some aspects of the union victory contained gloss: Confederate army was badly under supplied (a detour was made in the march to capture.... shoes), as the battle progressed, CSA forces become out numbered but still had to fight on on the offensive- and still came pretty close to winning. They then withdrew intact.
But, at the end of the day, Union forces, for the first time ever, stopped the CSA flagship army commanded by their "A" team leaders and comprised of their best units. The CSA Flagship had been turned back before, but those earlier circumstances had not truly demonstrated that they were beatable.
Something different was in the air after Gettysburg. The Union army had closed the skill gap to the extent that while individual CSA units could still be tactically very lethal, the the CSA Flagship Army as a whole clearly beatable as a whole army.
A victory at Crete would be similar for the Commonwealth. Previously unbeatable "A team" Parachute and Mountain troops are stopped by..... ordinary Tommies. The seemingly unbridgeable German to Commonwealth skill gap narrowed and perhaps even closed. Individual German units remain very lethal- but their collective whole is demonstrated to be beatable.
Sure, there would be some gloss- The Germans were outnumbered, a good number of the Germans would probably withdraw by destroyer and fishing boats, a disproportionate number of the prisoners maybe badly wounded and left to be captured. But.... at the end of the day, and some gloss aside, the German Army "A team" was stopped- and that is yuge.
A Common wealth victory may open up other possibilities in regards to the Geo political sense:
- The sun was slowly setting on Empires, but not everyone in London cared. How "Greek" did Cretans feel in 1941? Would the Greek government in exile be invited to Crete? Or, would they remain elsewhere due to uhmmm..... "logistical problems"? Would the Cretans be presented with say a "guided referendum" regarding affiliation with the Empire? Would it need to be that guided?