So WI at Midway the Japanese manage to deal a crushing defeat to the US navy in which all the US naval carriers in the battle are crippled or sunk. Is it even possible? ....
Yes it is possible for Japan to win a naval victory. For example, I once imagined that Yamamoto's “Main Force”, battleships Yamato, Mutsu and Nagato, carrier Hōshō, seaplane carriers Chiyoda and Nisshin, cruiser Sendai and nine destroyers might have been closer to the Kido Butai so that McClusky's dive bombers sighted them to the North West before they turned North East and found Nagumo's force. The result would probably have been that Japan lost Soryu and Hosho and possibly either or both of Chiyoda and Nisshin, while the Americans would have lost their three carriers and possibly other ships
http://counter-factual.net/upload/showthread.php?t=14721.
It is not clear that Midway will fall after a Japanese naval victory because the marines on Midway outnumber the Japanese landing forces. Thus it is possible that Midway is remembered by America as a victory for the Marine Corps. Both sides might try to learn lessons from such an outcome which might change the details of how the war was fought later. However, it is fairly clear that the war still ends in August 1945 more or less as OTL.
One big difference is that there will be no Guadalcanal Campaign during 1942, which will also slow the attack on the Japanese position on New Guinea. Whether the Japanese take or don't take Midway, they will likely be exhausted and will have lost many aircraft and trained crews at Midway. Thus they will not be launching too many operations of their own in late 1942.
It is just possible that the Japanese submarine force will be committed to the Indian Ocean from July 1942. Until the Guadalcanal Invasion, Japanese submarines were actually starting to be quite successful against merchant ships (see “The Japanese Submarine Force and World War II” by Carl Boyd and Akihiko Yoshida
http://books.google.co.uk/books?id=UFJdpxXkIBoC&pg=PA90&lpg=PA90&dq=mozambique+submarine+august+1942&source=bl&ots=Av2546fmOm&sig=TeWypRAQXdBQs8YDuLAXtEV4MRk&hl=en&sa=X&ei=qlKET6vZOYbF0QXNicC1Bw&ved=0CEgQ6AEwBA#v=onepage&q=mozambique%20submarine%20august%201942&f=false). Possibly this weakens the British 8th Army and changes or delays the British attack at El Alamein
http://en.wikipedia.org/wiki/Second_Battle_of_El_Alamein. Again there is no big change to WW2 because the Anglo-American landing in North Africa would still go ahead and take Tunisia at roughly the same time as OTL. However, it would completely change how British opinion would view themselves and their place in the World because El Alamein was a big battle in British eyes. If Rommel is ordered to withdraw because of Torch before Montgomery attacks, there will be some interesting but unpredictable changes. There might also be some reduction in Lend – Lease sent via Iran to the USSR due to the Japanese submarine campaign.