Interesting thread idea, sort of reminds me of Turtledove's Ready for the Fatherland. Ultimately could be a bad thing in the long run - Nazi Germany might survive as a slightly tempered military regime, Italy would stay Fascist, the Holocaust would continue, etc...
No, no. The Holocaust would stopped ASAP, in a matter of weeks at worst, its perpetrators would likely be shot out of hand by the new military regime (along with a number of unconvenient witnesses of pst Nazi allegiances etc.).
As for Italy, it would remain Fascist in its authoritarian conception of State and society, if not in word. Demand for democracy, though, would grow strongly. Difficult times would lay ahead, with the risk of an equivalent of the Spanish Civil War between Republicans (including former "left" fascists) and Monarchists.