Well Italy wasn't too bad. They did win in Abysinia and their Navy was big, if low tech (I heard they couldn't even fight at night). Their army was not too small and much better equiped than the Greek army. I also heard they marched on Egypt and managed to lose with 10 to 1 odds in their favour.
So was the problem resources or operational dogma and troop morale or something like that?

Anyway, would it have made Germany's job easier like I describe or not? Perhaps the Brittish easy reign of the Med would have allowed them to spare more stuff elsewhere, occupation of Iraq, bombing of Ploeisti Romanian Oilfields, etc. Best case scenario would be the Italians not joining Germany, but going to war with Brittain and France over the Abysinian aftermath (and hatred), probably the Greek dictator may have been even persuaded to join Germany if he was promissed territories (Aegean Isles and Cyprus).