Italy is doing quite well in my 1936 GC's as AI (now it's 1941 in my game), it looses far less ships in battles with the british mediteranean fleet and manages to sink some of their cruisers. The Battle in Africa is more realistic, because the british have conquered Tobruk. The other african provinces change the owner every now and then. And A.I. Italy managed to land in israel, and advanced to suez, engaging british forces in a two front war. Only after a medium sized american expeditionary froce landed on the sinai peninsula, the italians had to retreat to palestine.
So especially the changes in naval combat made DD more challenging and therefore more fun, anyway there are some things which aren't so neat about DD in my eyes: no escort fighter divisions and the experience gain of land and air leaders.