Makes sense about the Spanish being more focused on developed territories and neglecting others and it opens the possibility for conflict between Spain and other states in a traditionally Iberian continent, although I would think that after the initial surprise of other states like France or the Nederlands making a state in South America the Spanish would become more interested in stopping further expansion or other states from taking a slice of the pie.
The Spanish are certainly going to try and guard their American claims fiercely, but with all things considered I don't think TTL's Spain has what it takes to dominate South America, Central, America, the Caribbean, and Mexico while also maintaining an empire in Africa and Asia. TTL's Iberian Union is going to be capable of so much more than OTL's individual Spanish and Portuguese empires, but I'm not so sure that it'll be greater than the sum of its parts in regards to the sheer territory it possesses.
During the 16th century, the Lesser Antilles, Guiana, Patagonia, (temporarily) La Plata, much of Brazil, and most of North America are all too marginal for Spain to justify expending resources on their colonization, so naturally these are places where European Interlopers are likely to thrive.
It will be interesting to see if French Equinoctial Brazil succeeds due to the Iberian Union united instead of competing against each other.
With a less focused Portuguese colonization, French interests in Brazil are likely to proceed with less interruption (albeit not unhindered). When French and Spanish colonial endeavors in Brazil find their focal points and a frontline forms between them, the indigenous polities existing on said frontline are likely to be able to play both sides against each other at first. Since the French are operating at a disadvantage in the Americas for a variety of reasons, they're likely to rely more heavily on native assistance, meaning they will likely supply their native allies with European arms and horses, while the Spanish act with greater impunity towards them due to their (initially) more secure position.
What all this means is that the OTL Tamoyo Confederation (stretching from Cabo Trip to Santos) is likely to be more like the Mapuche in terms of resistance to Spanish colonization in the redux. This will provide the French in Brazil with a convenient buffer against Spanish aggression for much of the 16th century. There are also likely to be French colonization attempts (successful or unsuccessful) in "Maragnan" (everything from the Potenji River to the Orinoco Delta).
I really like the idea of a Spanish/Iberian language being more incorporating of languages other than Castillan. It could make it easier to make all of the peninsula speak one language perhaps? Since it doesn’t draw as much on one group in particular? Would the Catalan language also be more included in this ttl version of Spanish? Also liking them drawing more on the Latin language. They could perhaps use that as a claim of them being true inheritors of Rome
I think that Catalan is unfortunately likely to be neglected when modifying Castilian to create a Spanish language (Hispaniol?), partly because of Catalan's perceived connection to the language of the hated French (since it is a Gallo-Romance language rather than an Ibero-Romance language like Castilian and Portuguese) and also due to the more impervious nature of Catalonia's institutions. Catalonia (and to an extent Aragon and Valencia) was also a region still on the decline in the 16th century, having never fully recovered from the devastating Black Plague, so its cultural input is deemed less important to the Iberian Union. The dwindling importance and wealth of Catalonia was also a cause for the neglect and abuse it experienced IOTL.