OP here.
TLDR: It didn't matter.
Long answer:
To get from NZ to Italy we put our little suitcases inside our big suitcases. This let us bring extra stuff to Italy that we didn't need on the domestic flights.
For the domestic flights, we always ended up checking our little suitcases anyway! That's because we were traveling with my parents, who had brought big suitcases, so we would have to deal with baggage claims anyway. Since there was no extra cost for checking the little suitcases, we went ahead and did that. Less to lug through connecting airports.
There was one exception (to the "no extra cost") and that was flying from Malta to Catania. The Malta airline charged forced us to check in all our luggage, which would have been find if they were free, but they also made us pay extra for each one. I think when my dad had bought the tickets he didn't notice that any checked bags cost extra. So that kinda stunk. But it had nothing to do with the size of our bags.
So in the end, none of it mattered, in terms of airlines. We always checked them, and wouldn't have saved any money by treating them as a carry-ons. We could have just brought big suitcases... but that would have been more weight to pull around. And we would have more stuff to pack and unpack whenever we changed location. Also, it was a lot easier to fit our stuff in taxis.
I'm glad we "downsized" for this trip. It didn't matter for the flights, but it did matter in terms of minimising the overhead of travel.
So that's the after-action report in terms of luggage. In terms of the trip itself, I need to update the other topics I created on here for that, when I get a chance. (I have been organising photos and videos from the trip every single day since we got back and am still not done yet, so that's my priority at the moment).
In short, though, it was a great trip. Amalfi Coast was scenic but crowded. Tuscany was relaxing, Siena being my favorite place on the whole trip. Florence and Athens were crowded, but not nearly as bad as Amalfi Coast. Santorini was starkly scenic and full of cats (which we love). Malta was crowded, but I've been there before so it felt "easy". Catania is, well, Catania. A messy mix of life and decay, trash and tidiness, cold and warmth, chaos and tradition. I'm used to it, and have learned to focus on the positive things (and the things I can control) when I am there. Not that any of that matters, because this topic was just about luggage! :)