I do not think that Franco was such a far-sighted individual or so savvy in international politics to know that Germany would lose, when it came to WWII. While Franco knew that his regime was a fascist dictatorship that would not be welcomed in the European group of democracies if the Allies won. But Franco was shrewd enough to remain formally neutral (German bases aside) and bide his time, which ensured the long life of his regime.

I find fault with the rosy view of the Spanish Republicans that Walzer seems to entertain -- songs and stories do not make politics more moral, just more passionate. The Spanish Republic was possibly doomed since its start -- the 1931 Constitution contained articles that hit the Catholic Church as much as Revolutionary France had done 140 years earlier. Yes, the Catholic Church exercised enormous and nefarious power in Spain; but on a country so deeply Catholic, blunt anti-clericalism was destined to create unsustainable divisions. Moreover, the Republicans contained, as you rightly point out, many factions: and a number of them, while being surely republican, were not strong supporters of democracy and hoped for a proletarian revolution that was not envisioned as a peaceful change but implied a rapid elimination of opponents and transformation of society according to the paths laid out by the Russian Revolution, or the destruction of functional power structures in case of the anarchists.

Since the beginning the Republican side was divided, both ideologically and in action. Violence was astonishingly high, and political murders and executions shockingly common in the years leading to the Civil War, both under the Republican coalition and under the CEDA coalition, in the times that either was in democratically elected government. In these years, divisions allowed extralegal executions and plain murders to go unpunished and increased the polarization of the country. And while the Republicans remained divided well into the Civil War (a conspicuous number of murders were perpetrated on allies not toeing the right line, like Orwell's testimony makes clear and historians have ascertained), the Nationalists only became more united and efficient.

Yes, Franco's coup of 1936 was a rebellion against a democratic elected government -- a government elected by a majority of barely 1% and which, instead of recognising that in such a divided country policies of conciliation would be necessary, stiffened its anti-clerical positions; a government that had just failed to prosecute police officers who had executed a democratically elected member of parliament who was a monarchist. A government who could not even decide to arm its population, when Franco's troops came from Morocco.

This is not to say that the Spanish Republic brought civil war on itself... but it helped. And it was 1936: when Fascism, Nazism and Communism were victorious in Europe, hatred and fear were at an all time high, and most people could only think in terms of the complete annihilation of opponents.

The few democratic countries that survived were in a hard spot. It may be that they could have saved Spain's democracy by military supporting the Republicans -- but with no great results unless they had also been able to impose actual democratic practice. Illiberal revolutionary factions were later contained and turned democratic within the national liberation armies allied with the Allies, for example in Italy and France: but they were fighting a foreign invader, which unites people. In Spain, Spaniards were fighting other Spaniards and I suspect that to establish and maintain actual democracy only an occupation of the country by a foreign democratic power would have been successful: which is in itself negating the premise of democracy, as the USA has amply demonstrated in its several attempts at it.

So in my very modest opinion, the decision of France, Britain, the USA et al. not to directly send military support to the Spanish Republic may be judged a mistake depending on the evaluation of the situation. But a crime? I do not think so.