I don't think it's fair to call Italy's play in the Peanut gallery game awful. Sure, the results were awful, but there were some seriously good opportunities that it created. Imagine if I'd gone to Bud and Gal in F02 instead of attacking Turkey. Or, if I'd opened to Gal instead of respecting the DMZ.
I see how it looked silly from outside the board (or only looking at the results), but from inside the game I think his play was reasonable. I think the problem was more that we (Turkey and Russia) didn't step in to help him, rather than he made the wrong call altogether. From memory, we discussed me stabbing Austria in 1902 at length. I remember being pretty tempted. If I'd done it, it would have been a matter of ensuring that I was happy to wintergreen rather than R/T (easy to do by offering something Turkey can't, like Munich). Clearly, the game didn't play out that way, but I think it could have. I don't think the moves were terrible, and PW's diplomacy is strong.
On your other comment, I agree that no RT makes a stab of Austria possible. But I wouldnt want to say that that's the only situation where Italy can stab Austria.
I feel like no RT is more important for stabbing Italy as Austria rather than the other way round. The only time I've stabbed Italy immediately as Austria is when I was allied with a Russia who had an army in Armenia. If anyone has examples of great AI stabs early game with an RT (or no aggression there), I'd be super interested.