Wasn't the whole reason why it was rejected by Austria because it didn't give Austria anything in Italy?
Be that as it may, Austria's now got Spain, but France has for all intents and purposes got Italy - with Milan and Naples. While France wants Lorraine more, that doesn't necessarily mean that they're going to swap it out with Milan - which is also useful. I mean, the 1662 Treaty of Montmarte traded Lorraine for a pension (for all intents and purposes) IIRC and the rights of the house of Lorraine to succeed if the Bourbons died out. Besides, Léopold's just got Lorraine back. The duke of Savoy is a man with a foot in both boots, and at the time a French ally. The duchesses of Lorraine-Milan and queen of Naples are (half-)sisters. Both French princesses who are just as likely to want French daughters-in-law - Anne Marie was pushing for a marriage between her eldest son and Charlotte Aglaë d'Orléans OTL and Élisabeth Charlotte tried to get two of her daughters married to Louis XV OTL. True, their husbands' priorities might be different as Italian rulers/kings but still, I wonder if Austria's going to watch all this with a very jaundiced eye.
Can Austria rescue Spain as the Borbons did (at least until Carlos IV)? Or is it doomed to sink still further with a doltish ruler? It could make for interesting times to see though...
Frech royal relations are important and interesting but let's not miss the forest behind all these trees

:
1. After all these swaps France is getting pretty much its modern borders (plus Basque Country)
2. Duchy of Savoy ends up being well-positioned for uniting Italy well ahead of the OTL schedule by possessing BOTH North and South of the Peninsula.
3. French agreement to these provisions means rapprochement with Britain and the Netherlands (or at least improved relations with William of Orange), which leaves the Hapsburgs politically isolated.
4. At least on the Wiki level (

) conditions are not including any bonuses for the Brits and Dutch (like a right of the slave trade in the Spanish colonies) and there is, quite obviously, nothing about Gibraltar and Minorka.
Now, let's assume that Louis is sticking to the agreement AND, in a rather untypically shrewd move, he endears himself to the Brits by openly withdrawing his support to the exiled Stuarts (they can live in France on a modern pension but there is a French guarantee of no support to their possible adventures). What do we have in a near future?
Charles II of Spain issues declaration about an undivided Monarchy (as in OTL) and the Hapsburgs can run with it as a fool with his rattle: they are the bad guys as far as the French, Brits and Dutch are involved. When Charles dies there are 2 (IMO) main scenarios:
1st, Britain and the Netherlands remain friendly neutral to France because the Hapsburgs are clearly a disagreeable lot and there are no reason for supporting them. It is assumed that France is capable to take care of the situation.
2nd, B&N are joining forces with France because additional provisions are made about their goals in a coming war: (a) a clause of the Barrier Fortresses (France generously agreeing to the Dutch occupying the fortresses in the Hapsburg Netherlands) and (b) a clause of the Asiente Right for the Brits in the Spanish colonies.
In both cases Savoy is firmly in the French camp because it is going to win substantially and Bavaria is French ally more or less by definition. In Germany Hapsburgs still can count on the Prussian contingents and probably some less important players. With the active British involvement the balance may slightly change.
Even in the 1st scenario anti-Hapsburg side has a serious naval advantage on the Med making sending reinforcements to Spain rather problematic (anyway, the Hapsburgs will need some foothold on the Med to send them).
Hapsburg camp:
The Hapsburg strategic situation is not very good because they have to operate on the widely separated theaters, Italy, Netherlands and Spain (and to deal with the French attacks on their colonies), while not having adequate financial resources to raise enough troops.
By the beginning of war Hapsburg "standing army" was in the range of 24 - 30,000 and had to be reformed and increased in the course of war.
Their most powerful ally in Germany, Kingdom of Prussia, has a well-trained army but its size is less than 40,000.
By 1701 the army of the Spanish Netherlands numbered 18 'miserable' infantry regiments and 14 cavalry and dragoon regiments to a total of 6,000 'gueux et voleurs' (beggars and thiefs). In OTL it was reformed by the French with the numbers reaching by 1702 approximately 20,500 (16,000 infantry and 4,500 cavalry).
In 1700 the Spanish army in Spain had approximately 17,000 and in Italy under 12,000.
French camp:
France has a strategic advantage of the internal communication lines, a much bigger standing army and ability to increase it significantly within a short time.
At the beginning of the Spanish Succession War the French Army numbered about 200,000 men (by 1703 its size almost doubled).
Army of Bavaria is approximately 19 - 20,000.
In the case of the 2nd scenario: add 92,500 for the Dutch (including their foreign troops) and approximately 20,000 for the Brits (but this would be just a starting number for 1700, they just cut army down from almost 100,000 they had at the time of the peace of Rijswijk).
The Hapsburgs still may reach an advantage on one of the theaters (most probably, Italy) but they can't have their best general being everywhere simultaneously and they don't have enough troops, even with the German allies, to parry the French advances on all theaters. Situation is more or less similar to one in the end of OTL war when Eugene was left alone AFTER all the earlier French defeats.
The only potential danger for the French is expanding war deep into the Spanish territory: they'd waste time and resources on something they are not planning to get. A limited campaign in Catalonia is a different issue.
Aftermath:
France (with or without B&N) is winning with the territorial adjustments along the lines of the Treaty of London. Archduke Charles is now King Carlos III of Spain ("idiot's wish is coming true"). AFAIK, there is very little in his biography to think that he manages to bring Spain back from the ruins (but I may be wrong). His brother, Joseph is an emperor from 1705 till 1711 and he does not have any male issue.
Now, it is 1711, Joseph is dead and Europe is facing a
new succession crisis:
NOBODY wants a restored Hapsburg Empire, even without Italy but in producing the Hapsburg males Charles is even worse than his late elder brother: actually, in 1711 he has no children at all. He has a legitimate claim to the hereditary lands (if those who matter care about the legalities) but what about the imperial title?
What will happen next?