A Better Deal means, in all likelihood, the Allies handing Italy Dalmatia. This will infuriate the newly created Yugoslavian state, but Yugoslavia is a bizarre creation that is unlikely to survive the long haul anyhow.
Italy being democratic, allied and non-fascist is likely; Mussolini may well be a Fascist leader, but he'll be fringe and the Italians, while probably taking a bad turn in the Great Depression, probably WON'T inspire a certain Austrian Army Corporal or many other copycat movements.
Something is going to happen to Germany, although Italy may well remain democratic after its efforts in WW1 have been compensated. At worst, Italy goes somewhat autocratic but remains pro-Allied.
Dalmatia might not be great in terms of a hostile population, but Italy has a Venetian claim to the region.
If the result is really a Serbia for Italy swap, the Allies have clearly come out far ahead. But more likely, Fascism never emerges as a term, and some kind of "National Revivalism" emerges, possibly in Germany, Possibly in other nations that went autocratic in the 1920s--Poland, Austria, perhaps even Germany--with that nation as the pioneer. Note that one very possible, and very scary outcome, is that Germany goes Red--and then Europe is in serious trouble.