If German engines cannot be had, could Italy make any use of France's Hispano-Suiza 12Y engines? And if Italian radials can be improved, could Japan make use of them?
The thread is really suffering from a lack of defined timeline. What Italy could do in the spring of 1940 is a lot different from what they could do in the Fall of 1940.
They can't decide to un-attack France in June of 1940.
SO we have two choices from which other choices branch off.
1. Italy does NOT attack France and stays neutral. What happens in 1944/45 against the Soviets takes a lot of interpretation.
2. Italy Attacks France. And in late 1940/early 1941 decided they have made a mistake but it will take years to sort that one out. When does Britain resume coal shipments, When does Britain/US start sending any real amount of oil to make up for Germany shutting off 'traitor' Italy? When do Britain and the US 'trust' Italy again?
Now back to No 1. Italy is NOT going to get French H-S 12Y engines from the Germans or Vichy France. Why would they? Germany is so desperate for money they sell used/overhauled engines to Italy, who just stabbed them in the back?
And why would Italy even want H-S 12Y engines?
Isotta has a V-12 of their own. Take one cylinder bank off of the W-18. Not as good as a DB 601 but is it worse than a H-S 12Y?
In 1938 they were claiming 960hp/2400rpm at 4,000 meters from a 594kg engine. No reason to go with a H-S 12Y engine.
Granted the Isotta Factory is not really large.
You also have the Prototype Fiat engines.
On the other hand, why would the Japanese want the Italian radials? The best radial they had was the A.74 and trying to use that in a Ki.43 or an A5M was not going to go well. Then we are arguing about Italian experimental and/or low production engines vs actual production Japanese engines. Japanese may have better fuel.
"Trust" is a key word for Italy staying neutral. Unlike neutral Switzerland, Italy had been mucking around Ethiopia and in Albania in the 1930s and acting cozy with Germany. Italy needs to distance itself from German well before the attack on France to have any impact on French troop and naval force deployment.
Britain may not decide to invade Germany though an neutral Italy but the soft underbelly was more in reference to the Italian military and not the terrain. Turned out that the soft underbelly was not so soft.
I can see Britain accepting a neutral Italy, but is going to take an awful lot of Italian "gifts" to get the British to do anything that was going to increase Italian production capabilities.
Like ship machine tools, more than a minimum amount of raw materials and the like.