Hiya, I can help. Booked LHR-MXP-LCY in Y back in Sept. Short answer, yes 1 bag is included, when you do OLCI you'll see it there. Beforehand the AZ MMB will try to trick you into adding a bag for AUD $110 which is the cost of a second bag.
There didn't seem to be any way to add your Velocity number until you check in, Velocity doesn't show as an option until then (see pic). Got free seat selection (use the AZ PNR that will be in your itinerary email) with back half of plane to choose from, I think everyone gets that.
Shockingly bad legroom on the A320 but heaps better on the Embraer. Expect the usual Alitalia chaos when boarding. You'll get a similar service to VA - cold drink and some crisps.
Taxes were high, but at the time it was a great value redemption as had to fly at short notice on a Friday night, and BA was on strike so AZ/EZ were both really exxy. Cash flights were around £1200 (AUD2250) return, and I paid 15600 points and $100, so overall pretty happy. I booked these via the offshore service centre, and for once it went perfectly fine. If you feed them exactly what you want, they will find it. Use Expertflyer to search for availability, it seems spot on accurate.
Happy to answer any other questions you've got...
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