Yes, Catholic priests could refuse to wear clerical garb. Were Catholic priests harassed by Mussolini? I don't think so. This is a red herring. Gysies were another story however. there was no rounding up of Catholics - many of the top Nazis unfortunately having been Catholic themselves.
Are you serious? Catholic priest TODAY may choose not to wear their collars but, back then they all wore them, proudly, I might add.
Go look up what happened in Holland, I believe it was, after the Nazis found out about the Catholic churches and convents hiding Jews. There WAS a round up of priests and nuns.
Also read about St. Maximillian Kolbe and Sister Teresa Benedicta better known as Edith Stein.
Those top Nazis may have called themselves Catholic but obviously they weren't as noted by their actions.
Also, read abouot Pope John Paul's time during the war. He didn't have it too easy.
For the record, here's a Yale webpage fretting a bit about Neo-Nazi's linking to articles by Noam Chomsky...doing what? Pretty much: blaming the Jews for all wars going on...
http://yaleglobal.yale.edu/display.article?id=2791