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The Germans helped Franco come to power in the Spanish civil war, why would he wish to be a conquered nation rather than an ally? And even if he did, would his poeple stand for it? Were this an isolated change (and Franco decided to commit national suicide) from historical fact, you would be right. If #1 were also going on, no BoB would be needed.
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Franco was not keen on what would essentially be a German occupation of Spain. In this sense, he was no different from Mussolini in Italy who insisted on minimal German presence in Italy. Mussolini actually insisted on running more of a "parallel war" rather than outright coalition warfare like the Allies had.
So, for Franco, whose army was heavily debilitated from the recent civil war, the choice is not between agreeing and forced occupation; it is between forced occupation and occupation. I would say neither was palatable to Franco and that is why he neither joined the Germans nor allowed their presence in Spain.
If no Battle of Britain occurs following the fall of France then the British are in a far stronger position right off both at sea and in the Mediterrainian. They could afford to reinforce Malta much sooner and with more material.
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Malta was a pain in the German backside not because of the troops on the ground, but because of the planes based there raiding the Axis supply lines. Take away the supplies to malta based aircraft (as the German airforce did suscessfully until operation barbarosa), and you remove or greatly reduce that thorn.
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Planes and submarines. Malta was a major base for British subs operating against the Italians and supply convoys. The Germans were only with a major aerial effort involving hundreds of aircraft able to suppress air operations from Malta for short periods of time.
The problem for the Germans is they lack the aircraft to do this continiously without hurting in major ways other theaters of operations as well as their air support in North Africa. The secondary problem is one of fuel which is also a problem. Note how many Axis convoys sailed with as few as 1 to 3 ships and that tankers often sailed with as little as half a load.
Even without major interdiction from Malta when the Germans were receiving as much as 80%+ of the supplies shipped they were having severe shortages at the Libyan - Eqyptian border as the major supply port was still Tunis with Bengahazi being a minor player due to damage to the port that the Germans proved incapable of repairing. The major supply bottleneck in North Africa is not at sea for the Germans; it is on land.
You asked how the British got around this. First, they had a double rail line to the Libyian border. Trains are far more efficent at bringing supplies forward. Second, the British (and US) had the units and capacity to clear and repair ports making it possible to use them more efficently in sustaining their advances. Third, neither the British or US suffered from a shortage of trucks to any great degree.
Malta was not the crux of the problem for the Germans. It was moving the supplies overland in trucks along a vulnerable and very long single highway.
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Where and how were the British getting their supplys? Some were coming from India, but the rest were coming from england, right? with the western med closed to British ships, no supplies could reach montgomery from there.
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Most of the Commonwealth's supplies were coming up the Red Sea and through the Suez Canal to Alexandria. The supplies from Europe came around the Cape of Good Hope South Africa. Yes, it was longer but a much safer route. Massawa Eirtria was turned into a major stop over port for transports to get their hulls scraped and painted (a 3 or 4 day operation) saving alot of fuel and time in transit.
This was true whether Gibralter or Malta are effective and in British hands or not. Also, the Germans really have very little to interdict this route. The few Type IX submarines avaiable are already spread very thin in the Atlantic. Adding the South Atlantic with far less shipping overall to their operating grounds will reduce not increase their effectiveness.
While this required more hulls than transiting the Med, the British / Allies had them to do it.