Susano
Banned
That's why my first thought was that Henry Julius (or the other prince who receives Modena) should convert to receive it. I can't see the other surrounding Catholic states accepting that (including the Papal States), and they would do anything possible to avoid granting Catholic lands so near to Papal territory to a Lutheran.
Also, if he converts, he would probably receive Ferrara also, maybe as a gift of the Pope for chosing the "true faith".
I cant see the Pope giving away land like that. The Popes, as a line, have at this point invested too much time and efforts in the recent geenrations to gain their lands back in line and free of of local signories. I cant really see them starting this all over again. And besides, half the Welf lands for Catholicism really isnt all that much. Enough to favour one side in a succession dispute, but IMO not enough to just gift land away. Besides, the Pope was mostly allied with France anyways, so why should the Emperor care for what he has to say? And its by the Emperors grace that Julius Henry would gain the land in your scenario.
Besides, seeing his witch hunts and the expulsion of Jews I really cant see Julius Henry as being... religiously flexible and pragmatic enough for conversion, anyways.