I love Italy. Played it twice. I love the challenge of being the underdog. I conquered both France and Russia (can't wait for passive german AI)! In my first game I conquered all of Africa. It was an awesome and long battle.
In Russia we fought from 1941 to 1943. I had Moscow and Tankograd (industrial base in the Ural) and was besieging Leningrad when I friend my brain. I still warmly remember my Black Sea landing... I also landed in India but was kicked out... =( Aww! that was fun. Also neat was Poland declaring war on me during the battle of Bucharest... And my blitz move to pocket their whole army (30 divisions) in Romania via the fall of Lvov...
I like to annex Yugoslavia, it's my first phase. Summer 1937 sounds good. You can take it in 2 months. Then I moved to Romania to secure my oil. Then Greece. Should all be done in a year, plus redeployment. Usually the French are static so I lay low in the Alps...
When you attack Yugoslavia you also have to be ready in Africa. Have it well garrisoned. think defensive first. If you can have 3 tank divisions it will do wonder. I like to send mad horses to link asap with my Ethiopian. Let the Brits attack Tobruk and be ready with a second line at full organization. Like 3 tanks and 3 infantry at least. then roll this force until alexandria.
In the Mediterranean Sea indeed I use Naval Bombers to control the sea. I base my forces in Syracuse with fighters. I try to not engage my navy unless I have air cover. This is what prove to be the deciding factor. To engage outside air cover is dangerous for the Brits have superior units and leadership. I only do transport mission. Of course if you're engaged send everything at once! Usually I can destroy the Brits navy i teh Med no problem. Not that I am THAT good, just the AI who is, er, irrational at times.
Useless to say boost your industry! I build industry until I reach 8 points.
Also always have Air Superiority whenever you attack. I usually have 1 place in my front where I concentrate my best leaders and have total air superiority. this allows for unconditional support of troops and quick demoralization of the foe!
Good luck!