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So I've noticed that this tech does not allow you to build factories or research the heavy industry techs. Is this a permanent condition, or can these countries, like Italy and Poland, convert to fully industrialized economies? I think it's great for historical accuracy, don't get me wrong, but does the player have a chance to change things around?
 
You can't "upgrade" yourself to Fully Industrialised, no - regardless of being a player or AI. The game time-span is relatively short, and any such "upgrade" would take most of the game to do, and thus be limited to having any effect only in the last few years (if at all), plus (historically) there are only a couple of likely contenders for such an "upgrade", both of which largely rely on grabbing someone else's tech base and sending it home/incorporating it into your own structures.

However, with a little bit of time, you will be able to build IC and the later Heavy Industry techs (1939 onwards, IIRC).

Tim