This is all true.
Firstly, it’s possible that Hitler could have restrained himself for the moment and go against the Mediterranean, a decision support by Raeder and Goring.
Secondly, the main reason Franco was so toxic was that before Hitler’s meeting with Franco, he sent Wilhelm Canaris, a secret member of the German resistance movement, to negotiate with Franco, and Canaris said that he though that Germany was going to lose the war and Hitler was planning to move to the east (it’s said that Hitler was actually going back and forth between the Mediterranean and the Soviet Union). If Hitler really committed to it, he would have been more forceful, and Franco would have relented, especially if the Battle Of Britain had not concluded yet. If Vichy France entered the war, Hitler might have been able to mediate between it, Italy, and Spain about North Africa.
Finally, a similar situation could have appeared with Turkey, where if Hitler really did everything possible to convince them, it might have worked out. If it didn’t, Germany could use their paratroopers (as they would not be beaten up at Crete, due to the British heading for Tripoli) to possibly take Cyprus, depending on the result of an airborne invasion of Malta. Due to no British intervention in Greece, there would have been no disaster at Cape Matapan, and Italy’s navy, along with a Luftwaffe not burdened with commitments on the Eastern Front, could have swept the waters around Cyprus (as likely as not), and launch an amphibious invasion if paratroopers alone can’t cut it. If Cyprus is taken, a leap into Vichy French Syria would be in order. From there, Germany can launch a massive offensive against the Suez Canal, which Britain cannot hold with an attack on two fronts. Additionally, Germany will have support from Iraq, which won’t be destroyed with direct aid from Germany and Italy.