If you choose to cede the territories Italy is demanding, it will keep her out of the war for good. The downside is that the NM of Austria-Hungary will drop like there is no tomorrow ( I don't know the exact percentage, but it's really bad. ). Personally, I do not think it's worth it to sacrifice that precious NM to prevent Italy from entering the war. You will need every bit of NM to fight Russia, Serbia/Montenegro/Albania, Romania and Greece, but that's just my humble opinion.
As for the Greek diplomacy entry thingy, I guess she should join with all her forces if you were to mobilize her trough diplomacy, but like the previous posters said, it does not worth it to spend all those MPPs on Greece. The few gains you could make would be a couple of tiles in southern Serbia ( If your lucky, because with that mountain terrain, 2 detachments and a corp could hold the Greek army without a problem ) or in the European part of the Ottoman Empire/Bulgaria ( Just like Serbia, Heavy mountain terrain, perfect for defense + narrow path/road makes it almost impossible to achieve any real gains ).
Cheers,
Mathieu.