I can validate the Italian supply line problem (probably 1.03b, not CORE).
When I initiated support to Mussolini in NA, I created a supply route from Albania to Tripoli and the Italians were starving out their troops there.
As soon as I started up oil and supplies, their troops began to regain org.
So, it seems Germany can supply from Greece and Albania/Yugoslavia, although I always thought that supplies and oil needed to be traced back to a factory output province, but none of those are available in the med. for Germany, even after annexing Yugoslavia/Greece/Albania.
I selected Albania because it has a capital province that produces 5 oil daily, not sure though if this effects anything.
I am sure the Italian AI sets up supply to NA, but I guess when they get into a war and sent more troops, they do not increase the supplyline (add more cargo ships to the convoy)
Anyway, my DAK consisting of 2 motorized and 1 tank div under Rommel could move and had supplies, they drove Egypt and UK back to Tobruk
