Italy is fun to play. In my first ever game of World in Flames I gave them a try. I built transports to start, so my glorious Legions would be able to sail the 7 Seas picking up riches to bring home. Then, the Royal Navy arrived and my dreams crashed into reality pretty quick.
The only Power for whom land combat rolls are more consequential is probably China, though they are wise to avoid making them until at least the middle of the game. Italy certainly can be played like that as well, and profitably, but that’s just not as fun as attacking something.
In all of WiF though, one has to play to the game system. And WiF greatly rewards using aircraft at sea. Building out a NAV force pool can reap rewards from the dice more than other unit build choices - such as building CVs for Italy. I like to do that once in a while, but it is a choice of optimism. An Italian CV is only cost-effective after (and, IF) the Axis take Gibraltar or Suez. Inside the Med, those 7 Build Points could have instead put 2 FTRs in the air for Italy, and that would gain you a lot more.
Even though Italy starts with just a 2/3 chance of drawing a FTR that can reach the 2 box, they do get more such FTRs in future years. And if they lose their initial longer-range FTR in combat, it us worth rebuilding. Because eventually the Royal Navy’s bi-plane carrier fighters and few twin engine fighters will get jumped by modern Axis monoplane fighters without benefits of surprise, and the Allies can find themselves with little-or-none in the way of naval air cover in the Med for multiple turns at a time.
Astute Axis aircraft builds can lead some Allies to temporarily cede the Med to the Axis (a mistake, however), as they are too afraid to lose units (they shouldn’t be).
But the balance of power in the Med, and thus Italy’s strategic freedom, hangs on their air force more than anything.
As for what can keep the CW from loading up the Med with all of their CVs, that would be: U-boats. And Italian SUBs. If you don’t push on your enemy in their area, that frees up their assets to come to your area. So after NAV & FTR, SUBs help Italy a lot. And not just in terms of how many ships the Royal Navy sends in to the Med, but also how they use their action limits. If they have to take additional naval impulses in a turn largely to re-organize convoy points, that is less mischief Monty can make on land.
But the Germans need Panzers in Russia (notably absent from the OP’s narrative), and they need their own action limits to drive those Panzers, so Italy will always have a need to do more with less. And thus their build choices are critical.