Question

what did mussolini do with communism

Answer 1

Western leaders like Churchill or Roosevelt certainly thought of Mussolini as a some kind of saviour from communism. 
Churchill had told Mussolini that the fascist dictator had “rendered a service to the world” by destroying the Italian labour movement. “If I had been an Italian, I am sure I should have been whole-heartedly with you from the start to finish in your triumphant struggle against the bestial appetites and passions of Leninism,” he announced, during a visit to Italy in 1927.
Roosevelt when he heard of Mussolini succesful attempts of reviving the italian economy had said: That man is a genius. 
And western press kind of liked him too. (before WW2 of course). This article: How journalists covered rise of Mussolini and Hitler:

The bolshevik revolution, which happened in Russia in the middle of WWI, bothered them, because they felt the socialists in other countries would take an inspiration from the revolution and attempt to copy the Soviet union style of government.

The situation in Italy immediately after the WWI: 
At the end of World War I, Italy was in a deep debt and there was chaos in the government. Italy received very little from the Treaty of Versailles even though it was one of the winning nations along with America, France, and Britain. The Italian national pride took a hit and the people felt cheated. As the disorder grew, Mussolini and his Italian Combat Squad recruited unemployed ex-soldiers and formed paramilitary squadrons that would restore peace in the streets of Italy. These Blackshirts, as they were called, clashed with communists and anarchists. The government did nothing about the blackshirts’ actions because of its incredible weakness and fear of a communist takeover.

The role of Italian Socialist Party (PSI):
After the Russian Revolution of 1917, the PSI quickly aligned itself in support of the communist Bolshevik movement in Russia and supported its call for the overthrow of the bourgeoisie. From 1919 to the 1920s, the Socialists and the Fascists emerged as prominent rival movements in Italy's urban centres, often resorting to violence in their clashes. The left-wing of the party broke away in 1921 to form the Communist Party of Italy, a division from which the PSI never been recovered and which had enormous consequences on Italian politics. In 1922, another split occurred when the reformist wing of the party, headed by Turati and Matteotti was expelled and formed the Unitary Socialist Party (PSU).

Conclusion:
I don't know if communists had a high chance to either win the majority in elections or to attempt a coup detat. In my opinion what they needed to succeed immediately, were 2 things: one united political party (the splits in PSI certainly didn't helped them) and a leader (someone like Stalin or Lenin - persuasive and charismatic type). They lacked both, while in contrast the fascist party was not only strictly united, but they had a charismatic and persuasive Mussolini as their leader. (these are the simple facts, I don't glorify him, believe me :)) And this is the reason why the fascists succeded. 
So, did Mussolini save Italy from communism? Maybe yes, but at the same time I think the communism movement was too shattered to pose a big threat. Maybe after while they would find a good leader and unite the party, but from doing so they were prevented by Mussolini, who outlawed their party and got them jailed.