You miss out the third problem - it means Britain knows there will be no invasion attempt any time soon.
Actually it doesn't. How many resources is this going to actually take? If Franco goes along in terms of ground forces the answer is not very much.
1 Mech Corps for Libya (1 panzer and 1 motorized divisions)
2 Air Mobile Divisions for Malta
2 Infantry Corps for Gibraltar (6 infantry divisions and heavy artillery support for LOC and actual attack)
Ten divisions total, no problem in 1940.
Germany can still have a big land force on the Channel coast that the British simply can NOT ignore.
The drain of this plan is the Luftwaffe forces. Its going to take a full Luftflotten for the Med option at least, more likely 2. One for Malta / North Africa and second for Gibraltar. In 1940 that leaves 2 for Germany. So that makes doing anything other than harassment over England problematic.
A large chunk of the troops, planes and ships that were slated for home defence are freed up for elsewhere. All the R&D and panic production of anti-invasion weapons can produce something useful.
In late 1940 the British are short of kit for much of their troops and need time to build up equipment. The advantage of a 1940 is the British simple do no have the time produce new gear and then ship it out. They have to for the most part fight with what they have on hand. In 1940 the Germans have way more on hand to fight with. Again they can't strip UK all together.
Once Germans committee air troops to Malta that is a clear sign that they aren't going to go into England but by then its too late to be honest.
That frees up a great deal to defend against any German Med Option, and unlike Germany the British actually have sealift capacity and will be on their own territory, so can transport and supply a far larger force.
1) Look a map, British are on the wrong end of 12,000 NM supply line to Egypt. Once Malta and Gibraltar are under attack Western Med is closed to RN. 50 days for standard convoy (8 knots) to make that trip. For you to get it down to even 30 day trip takes 17 knot speed ships and those are in short supply and the British need cargo volume for ammo, trucks, tanks and other supplies. Liners can move troops sure but they are useless without kit.
2) Germans can use rail to Italian ports and then 600 nm jump to ports in Eastern Libya. Sorry the way I see it the Germans have the shorter logistical tail here, not the British.
British in short term can take troops from India and far east but continuing resupply has to come from UK itself.
As to freed up resources to avoid Invasion scare, some yes but again even then it takes time for it to matter. Time that the British don't have. It takes time to build the stuff and then to ship the stuff, which as shown above the British are along the long end of the longer supply line. Does it matter if the British can build more Crusader and Matilda tanks when it takes the British two months to get them to the front in Egypt?
If the Germans invade Spain to get to Gibraltar in late 1940/early 1941 they cannot "threaten" an invasion of the UK, because they will not have credible forces to do so. Also, of course, intervening in the Balkans is out at least in a major way - they may have some Luftwaffe available but not ground forces. Furthermore the transportation infrastructure in Spain in 1940/41 is crap after the Civil War, and you can believe the Spaniards will do their best to trash RRs ahead of German invaders. By the time they got to Gibraltar, there would have been tons of time to get ready, and the Germans would be at the end of a tenuous logistical string - and the Heer was not known for its logistic skills or planning. The Heer had few if any dedicated RR troops, one reason they had problems in Russia where they had to regauge every km of track. IMHO no way the Germans can attack Gibraltar (do Felix) absent Spanish cooperation.
How many troops do you think going into Spain is going to take? Then consider how many troops Germany has. THEN consider how many troops Germany needs to meet its other needs. In 1940 after fall of France Germany can dump two dozen Divisions into Spain without issue and still have a matching force on Channel Coast. 1941 and beyond things change.
I agree Spain is in poor shape it was the official reason Franco gave for not wanting anything to do with the idea. At the same time to do the attack on the Rock the Germans are going to support a CORPS level operation, they can handle the logistics on that level. Its not like they need to support an Army group 300 miles from rail heads like they were doing in USSR.
I don't see Spain putting up real resistance, army isn't in shape for it. There might be a Partisan problem but that is something else in terms of needs.
Even with cooperation, and Franco was never ever going to jump on the German bandwagon without guarantees of supplies like food and oil which the Germans would not promise & could not deliver on if they did (and he knew it), getting forces in place will be no surprise and expect the British to use air dominance to attack Spanish RRs & slow things down, doing Felix is iffy. If Germany wins the BoB & looks like they could actually do the unmentionable sea mammal, or if they get to Alexandria, or if the Germans take Moscow in the first campaign of Barbarossa, than and only then will Franco get on the bandwagon.
If Hitler holds a gun to Franco's head and gives him a choice to bet on the UK pulling it out in fall 1940 or letting the German troops through I really don't see what the choice is. 1939 and 1942 are very different situations in Europe than was found 1940 after Fall of France.
This has to be done before 12/7/1941 because once the US is in the war then if Franco plays along with Felix even just by letting German troops transit & stage (no Spanish forces fire a shot) then food and oil which Spain is getting from the USA stop completely and privation and difficulty become starvation and economic collapse.
I agree 1942 is a different world. Med option makes sense in 1940 / early 1941. The earlier the better.
Michael
