I recently wrote a paper about the Casablanca Conference, and used mostly all primary sources. In the FRUS: Washington and Casablanca Conferences volume as well as telegrams between Roosevelt and Churchill, Churchill suggested an invasion of the Balkans for a second front instead of the invasion of Italy. However, the Allies decided upon Italy. By not invading southeast Europe quite yet, the Allies saved many lives because of all the German soldiers amassed in France. Also, the Germans used u-boats in the Atlantic to attack American and British ships.

Here are links to the FRUS and the Roosevelt-Churchill papers: http://digicoll.library.wisc.edu/cgi-bin/FRUS/FRUS-idx?id=FRUS.FRUS194143

http://www.fdrlibrary.marist.edu/_resources/images/mr/mr0018.pdf#search=casablanca%20conference

The perception going into the Italian Campaign was that it represented "the soft underbelly of Europe", and that the Italians would quickly fold once the fight was taken to the Italian peninsula. The benefit of this would be that Hitler would be forced to redeploy forces critically needed on the Eastern Front to Southern Europe, which it did, although not to the extent hoped for. As it turns out, Italian geography greatly advantages a defending force and the Germans were able to effectively fight a defensive battle up the peninsula over the course of the last year and a half of the war in Europe. The nature of the terrain and the ferocity of the German defensive lines meant that the campaign would be the most lethal campaign on the Western Front for infantry forces.

During the Casablanca Conference in Jan 1943, the two main topics up for discussion were the need for “unconditional surrender” on the part of Nazi Germany and the need to open up a second front to take the pressure of the Soviets. Stalin declined to attend the conference, citing that the ongoing Battle of Stalingrad required his presence in the USSR.

At the Casablanca Conference the American contingent, most notably Gen George Marshall, wanted to accelerate plans for a cross channel invasion, while the British led by Churchill advocated for a campaign in the Balkans in order to preempt any Soviet "liberation" of Southeastern Europe. According to Antony Beevor’s The Second World War, Churchill undermined the British argument to a large degree through inept diplomacy and an unrelenting focus of the island of Rhodes, ultimately forcing the American Chief of Naval Operations Ernest King to point blank refuse American support for any Balkan adventure. The Italian Campaign was the resulting compromise between the two positions.

From a purely practical perspective, any invasion of France would have to come mainly from across the channel for logistics; a hard enough time was had supplying the Allied armies in Northern France from across the channel, never mind the challenges of trying to shipping that much materiel to a force through the Mediterranean and then overland through Southern France. Also, after the unsuccessful landings at Dieppe and Anzio, there was considerable hesitation to land in areas considered well defended, which Sicily was not.

Writing this from work and don’t have my resources handy, but based largely off of Antony Beevor’s The Second World War, and Gerhard Weinberg’s A World at Arms: A Global History of WWII.

Edit: Spelling