Lybia has to be pacified anyway, after WW1. Probably it will be a longer and less bloody pacification process under a democratic Italy but I would not bet a lot of money on "less bloody": see the war of the Rif, for example, or the British "pacification" of Iraq.
It is not completely clear to me why less industrialization in Italy: if anything, a democratic Italy would be more open to foreign investment, and anyway the military industries created to cope with the demand of WW1 cannot be just left to wither on the vine. The products of these industries should be turned to feed internal demand and export, plus infrastructures in Italy (which also will include drying up marshes and creating new agricultural land: more or less the same things that fascism promoted).
Obviously it depends on the reason why there is no fascism: it is quite different if fascist March on Rome is stopped by the army or if fascism just fails to gather enough traction just because the immediate post war is better.
Using Lybia for settlement will certainly happen, but it will require pacification first and infrastructures: it will happen not earlier than the second half of 1930s, since the financial crisis will still happen.
Eritrea will also get infrastructures, same as it did IOTL. The highlands are better than the coast of Lybia, anyway.
Eritrea never was hostile to Italian presence, and I'd expect the same happens ITTL: independence will likely be granted peacefully in the 1960s (while I doubt the same will happen to Lybia, given the presence of oil and the high number of Italian settlers) but Eritrea will remain close to Italy.
Somalia is a bit of a lost cause, as well as a backwater: it is likely to remain a colony until the 1960s, and afterwards to gain independence. I don't see much good for them in the future, while Eritrea should be in a much, much better shape than OTL.