So I tried it again and I'm the NFG it's 1870, Italy formed and Austria is #12. They have no hungry and no Italian possessions. But I have to wait for the truce to expire in 5 years to sphere them. Is this too much time? Am I screwed?
You COULD break the truce to sphere them, but you'll get a lot of Infamy. You have plenty of time, but it is difficult to keep Bavaria and Austria out of the GP club while also having them sphered.
The problem is that it's easy to knock them hard enough that they won't be GPs post-war, but if they were GPs going in then you (a) can't add sphering as a wargoal and (b) they won't fall out of GP status until after the war is concluded.
As you point out, you're forbidden from influencing them during your truce so they'll have the entire truce timer to rebuild their GP statuses.
A lot of times I've found the only way to reliably keep Austria down is annexing significant portions of it as NGF.
Just see how it goes though. If you have most of your truce timer still left, you might want to Humiliate Bavaria just for good measure. They have a pretty decent chance of becoming a GP themselves.
Another thing that couldn't hurt is Cutting Down to Size. I can't remember how reliable that CB is because when V2 first came out it was essentially meaningless, but you want to do whatever you can to reduce and keep low any and all of the three scores for both of those countries.