I was wondering about the possibilities of Fascist Italy staying out of WW2, and came to the conclusion that considering Mussolini was not the wisest man alive, the environment in which he worked could greatly affect his own decisions. Therefore, I'd like to find out which figures in the fascist regime could have a moderating effect on Italian foreign policy in particular, dissuading Mussolini from entering the war on the German side. First obvious answers would be Galeazzo Ciano and Italo Balbo. Ciano resented the way Germany does not treat Italy as an equal partner and grabs countries without regard to Italian interest, and saw that Italy was unprepared for a world war and therefore opposed it. Balbo was against a German alliance from the get-go. Both were very close with Mussolini, Ciano being his foreign minister and son-in-law, and Balbo a persumed heir that played a crucial role in the fascist movement since before 1922. But Mussolini always thought he knew better, and his opportunistic personality made it hard for him to see that war would be a very bad idea for Italy. But other people could see it. I'm not sure whether it would just take a little more persuading by Ciano to dissuade Mussolini from joining the war (what would make Ciano do that is also a question) or you just need Mussolini to be born with a completely different brain (that might cause butterflies). A less obedient Balbo, that decides he needs to challenge the Duce more directly could help as well. I was thinking something around the Anschluss might do it, considering it was contrary to Italian interests after all. Maybe if there's some way to make Mussolini actually care about that, but I think by that point he already abandoned the 1920's foreign policy ideas of 'national security' that saw the maintenance of neutral buffer-states as an important objective, in favor of a more expansionist foreign policy that just wanted to grab anything it could as an end-goal. Perhaps if Italy makes more serious strides for influence in the Balkans, then the annexation of Austria could pit Germany and Italy in a cold-war over the Balkans? Not sure if that would be enough to actually make Mussolini abandon an alliance with Hitler entirely.
Other figures I was thinking about were the more conservative establishment, the King and the army. I was thinking maybe the King could decide to put his foot down at some point, perhaps noticing that expansionism is kinda stupid. A POD in 1935 over Ethiopia and no later would probably be needed here. But I don't think the King was in any position to really refuse Mussolini like that at this point. Maybe if figure in the army (perhaps Badoglio?) decided to assert themselves more on the side of the King, but I'm really not that knowledgeable about the characters of Italy's military leadership at that time to really say.
I don't think the idea overall of "moderating" Mussolini is ASB. IIRC in 1941 Mussolini commented (I think to Ciano) that it might be better for Italian interests if the British win the war in the end, and ultimately the Italian leadership realized it as well and deposed Mussolini. The only question is how to get Mussolini to come to that realization before June 1940.