Col Trevor Dupuy wrote alot of books, some people swear by him and others dispute him. He had one where by he created a formula that when you plugged in many of the major battles from back in say the 1800's up past WW2 his formula came within i think 5% of the actual casualties. Was pretty cool, i used to use it for PBM games...
Anyway his analysis (i may be wrong on the numbers but i think im close) had the Germans each worth 1.3-1.5 to 1 western allies (UK, France, USA) and something like 3-4 to 1 vs the Soviets. This was taking in all relevant factors.
It seems your of the opinion that basically HOI3 is, you take the unit, you take the weapons and training and officers and all things are equal then. I myself disagree. I believe certain nations historically are simply better at warfare. And its not all in High Command and training, they simply have a bred tradition and an upbringing both physically and mentally that is better suited. I may not be clear here sorry

i guess my point is this, if you take one division of German recruits and one division of Turkish recruits, train them the same, give them the same weapons and the same officers I still believe the German recruits will be a better fighting unit. How much? i cant say. there is simpy additional elements often hard to quantify. Just like some nations traditonally surrender and accept occupation and others fight unto death.
One of the biggest issues i have with HOI3 is thats how its setup. Start a game in 1936 and compare a German infantry brigade and a Turkish one, and youll see they are almost identical. Now over time the German units will gain an edge do to their LS they can invest. But the reality is with all the training in the world there is no way likely a Turkish Brigade would have been equal with a German one over the course of the entire war, much less at the start. The game is setup where as quantity wins not quality. In 1936 a German infantry division was likely worth at least as much as a Corps of Turkish troops. We dont see that in the game because there seldom is enough seperation in training between 2 nations where a single unit can beat more then another single unit. If we were going to base it historically, and were forced to use dates, then Turkey should start the game with something like 1900 Infantry and Germany 1940, that would be closer to reality. I mean if after the war Dupuy thought one German was worth 3 or 4 Soviets, how many Turks would he have been worth?
Getting back to the Italians, my point is simple, regardless of all the things they had to deal with, most of what ive read, heard and seen in my lifetime the Italians simply did not fight well. They simply did not conduct themselves with much quality. I think its a disservice to even mention them in the same sentence with the Germans, Brits and US. They simply werent very good at war.