First, expense is the main reason to be skeptical of the I.C., not the threat of losing it. But since I brought the latter up, I guess I might as well elaborate a little bit in my thinking in response to Tragedy.

In response to your question, losing Western Europe with an I.C. already there would be very much like losing Southern Europe. It might be easier for the Allies to get to Western Europe than Southern Europe, depending on what the board looks like.

I think it may be that part of the reason you don’t see the Allies invading Western Europe until very late is not because it’s impossible for them to take it, but because it’s too costly knowing they’re going to get quickly kicked back out again. (I don’t know; I guess I’ve never played against a really, really good German player and they might do a better job locking it down than I’ve seen players do.) Anyway, if an I.C. is already there, reinforcement is somewhat easier, even though they’d still be vulnerable to a turn of German counterattack. You’re mostly right on this, though; if you’ve been betting on naval superiority but your fleet has broken down and a large-scale invasion of Western Europe is taking place, you’re already in pretty bad shape.

As for Canada, well, I suppose that depends on whether the Americans are asleep at the wheel.

The other issue with an I.C. in Western Europe, apart from the fact that it is unnecessary and expensive, is that it becomes a catastrophe if the US or UK sneak in and take it. I suppose you’re planning on having sustained naval supremacy to prevent that, but that might not pan out and it seems a lot of eggs to be putting in one metaphorical basket.

Take my advice with the caveat that I’m also a bit of a noob - I’ve played the old Milton Bradley edition of this game a number of times, very briefly played a few of the intervening editions and I’ve just bought Spring 1942.

The Western Allies (by which I mean USA and UK) should usually be able to establish naval superiority over Germany if they are allocating most of their resources to Europe (which, I think most will agree, is probably wiser to focus on initially than Japan). So you should be able to keep your transports alive after Germany is able to get some of them by lashing out initially. Also, you don’t need to aim for Western/Southern Europe right away. You can land troops in Norway and Karelia, then march to the Eastern Front to soak up some of the damage from Germany, and enable Russia to defend its back door.
[edit: Also, don’t forget Africa/ the Med]

There’s a school of thought that you should build factories in Asia to slow Japan down, but this is riskier. Japan is pretty much inevitably better than the Western Allies at getting ground forces into Asia, and you’ll probably need Russia’s help regardless to keep them out of India/Sinkiang.