In 1939 spain had 3.000.000 soldiers.. mostly of them veterans (as it was evidenced by Blaue Division and Free-French Legionaries in 1940-1945) but a small fleet and air forces (Around 700 planes, from Grumman and Polikarpov to Bf-109 and Ju-87, He-111, Ju-88). About tanks also very different models, from Ansaldo small tanks to Pzkw IV, III, II, I. And oil only for 50 days.
Spain and Portugal had fought in the same side...not only Iberian Pact signatured by Salazar and Franco... but the Portuguese support to Franco during Civil War. Franco would never had attacked Portugal (as he didn´t in 1974 when USA wanted a Spanish invasion).
So, the only option is Spain and Portugal joined the Axis.. or none of them.
I think not projection at all. The Spanish-Portuguese Army would have been good for defensive operations or to attack under German system of logistic but not at their own.
I think they would have conquered Gibraltar (and lost Canary, Açores and Madeira) and they would have send regiments to Italian Africa and to the Russian Front.
El Pacto Ibérico (Iberian Pact, 1939 and 1942):