Sicily needs more landing craft than are currently available.
In contrast Rhodes is Italian, not particularly strongly held, much harder to reinforce than Sicily. While Sicily is a springboard to invade Italy, loss of Rhodes weakens the axis hold on Greece and reduces axis influence on Turkey. If Mussolini is somehow still hanging in there after losing every Italian holding in Africa and being beaten up in Albania, losing Rhodes will surely finish him off.
The thing is, he can't hold Rhodes unless he drives off the RN, which the remains of his navy are unlikely to do. The coastal defences go up to 6" guns, so the RN can outrange them with 8" cruisers and the older battleships. Air defences may be a problem, but carrier airgroups can probably deal with any second string aircraft. I'm not sure if Crete or other land based air is within range of Rhodes but that would be better still for the allies.
Another advantage of Rhodes over Sicily is that it makes it a bit easier to get an armistice. Eg Italy keeps mainland and Sicily (and a couple of adjoining islands) and stays neutral in exchange for all other possessions to be administered by allies with final decision on their fate to be made after the war plus fleet taken out of commission and at least some admin costs paid for eg Libya. Add in agreement that allies will support against a German invasion and it starts looking better than losing even more territory, people, money, credibility. Add in future discussions about joining in as a form of reparations (as OTL) and it looks quite good all round.
In contrast, invading Sicily may be seen as a step too far to allow a rapid negotiated end to hostilities.
If Italy does agree to terms, the eastern Med essentially becomes an allied lake. Unless Vichy gets overthrown (which = North African colonies joining the allies) the axis have no outlet to the western Med except through Vichy which isn't trouble free.
Quite a good position for the allies, less so for the axis.