The problem with rebels at least in EU3:IN is that, well they don't really cut to the cheese so to speak. They represent individual country tags and nothing else. What this means is that if you have Cosmopolitaine patriots in Brittany or Burgundy wanting to take over a province and defect to France, they end up fighting French vassals.
I see no reason why this wouldn't be so in HOI3 (Although I wish, I really do, that they would have patriots fighting for any of the three ideologies, thus a French patriot won't fight the Swiss). Thus, and with other modifiers in place (Rebels can't handle diplomacy, they can't build units, they can't do anything) the Spanish civil war should, predominantly, be represented as the fight of two blocs, no matter how unhistorical that may be. If it isn't (Basques and Catalans being represented as rebels or whatnot), it will be mighty easy for the Nationalists to win the war no matter what.
The question you need to ask yourself, in my opinion, is not whether or not it will be historical for the Spanish civil war to be fought by two independent nations both fledging organized armies, but whether or not any other alternative will be A.possible in terms of the system/AI/whatnot B.yielding the same results by 1939 C.In place for a game that concentrates on world war two on a global scale.
Considering how pretty much everything else is abstracted in the game, for example Yugoslavia after the axis occupation, Bitter peace giving all the territory to Germany (And not puppets) and so on, I'm rather inclined to believe that HOI3 will have the same Spanish civil war as HOI2 did.
