The most common way to play 6-player Diplomacy seems to be by having Italy's units hold every round and disband instead of retreating. How will this affect the balance and feel from the 7-player game? Which countries will be most affected? In general, how should each country change its strategy?
The biggest beneficiaries of Italy's absence from the game are its two immediate neighbors, France and Austria Hungary. All other countries lose by comparison, but especially Germany.
In a seven player game, I would rank France behind England, Turkey and Russia, because of France's vulnerability. Without the threat (and check) of Italy in the south, France becomes the strongest country.
Austria-Hungary, Germany and Italy are neck-and-neck for the three weakest countries in a seven player game. Without the threat of Italy, Austria-Hungary is now equivalant in power to Turkey, Russia, and an England weakened by the new French power. Meaning that Germany is left alone at the bottom. It is a case of "misery loves company.
I once played Austria-Hungary in such a game. Did well on the eastern front, balancing Russia and Turkey, but France walked away with things in the west. After the game, "England" (a very gifted first-time player) pointed out that he, Germany and I should have combined against France; and that when my fleet was ejected from Tunis, I should have "retreated" it to North Africa instead of the Ionian sea, to support his entry into the MidAtlantic Ocean.