The thread rises from the dead.
But here is my latest answer to the question on whether you should or should not align with the Pope.
This is without mods and on VH/VH.
When you play France, you will find the Sicilians show up on your doorstep in Marseilles pretty much as soon as possible. Why is this? Marseilles is a great city with wonderful potential for profit. When playing Sicily, why do the same strategy? It seems good to me. Sicily will quickly run out of cash (I think the AI gets scripted additions, though I am not certain). So here is what you should try:
Send the good princess up with the Adriatic fleet to make nice with Venice and HRE. Trade and alliances and you get florins -- florins to stave off the bankruptcy of Sicily. Train a diplomat to do the same with Rome and Milan. Yes, the Pope will be happy to hand you florins.
Build the ballista facility and the archery levels in Pamplona and tech up Naples. You want everything including the levels of armory available.
Keep your army in Naples in Naples. Combine your forces in and near Pamplona (leaving a general as garrison) using your Central Med fleet to invade Marseilles and then move the fleet to blockade Toulouse. Make certain you have your Italian alliances in place first.
Use your Adriatic fleet upon returning from Venice to move an army to take Durrazo (hopefully for 2500 florins). Do not waste time though. You need to be in possession of the castle for the next step.
After you take Marseilles (by occupation -- remember these are good Catholics), a French diplomat should arrive in Northern Italy. I think you should find the French will now be happy for a ceasefire. You will find that they are also willing to throw in Toulouse. Be certain to include a ten period tribute of 200fl, 1000 fl cash and trade. You want the French to be happy so that you will be able to ally with them later. Oh yes, make certain that you also include Durazzo in the trade/ceasefire as well. Nothing like that worthless castle in French hands to tie them into several future wars that you will be able to come to their aid in.
This will result in a duplicate of your starting potential on the Riviera which is very good population base. Now sit and tech up waiting for the eventual conflict in Northern Italy. The perfect storm would be war between Venice and Milan where you can side with Milan. And then when Milan launches into France, you will side with France to complete the conquest of Northern Italy.
If you are truly lucky, the Pope will gift you 500fl while you are at war with France.