In my opinion annexing the whole of TS would "break" the balance in the Confederation ( 4 monarchies and 3 republics) and TS is just big. I was going for another republic and at least one kingdom, maybe a duchy in the Abruzzi and another in Naples with a republic in Puglia. The "goal" of this Italy would be to consider the local differences of the various regions and southern culture is not a single block so to have the soon to be Federation more representative of local diversity.I would go with the first option. Hard to resurrect the Duchy of Spoleto with Spoleto itself in the Roman Republic. I really do not see the problem of admitting the Kingdom (aptly renamed the Kingdom of Naples, of course) though, nor I see why the plotters should agree to have the kingdom broke into, say four duchies (Abruzzi, Puglia, Campania, Calabria). Maybe a Regency council can be put in place and the crown bestowed on Amedeo of Savoy, VE's third son (who should be 15 now) creating a third branch of the House of Savoy down the line, of Savoy-Naples. I am partial to offering the crown to Lucien Murat, but that might just be me.
As for Amedeo, I have other plans for him.