I've got some time right now, so I'm going to condense what I've been tl;dr'ing about and make it more directly applicable to Cesare. Reading about the historical figure is what got me interested in this topic in the first place a couple years ago. There's a biography about him by Sarah Bradford that I really like. It's definitely part of the apologetic movement, but I prefer those anyway in his case for various reasons. She mentions ethnicity as something that is key to understanding why he was doing the things that he was in her introduction but then pretty much drops it for the rest of her book. It comes up once or twice and starts to raise some interesting questions (the keywords for this icon are quoting part of one of them) but she never explores them. I was disappointed by this, even more so when I realized that it wasn't just her--no one talks about this. I don't mean that nobody talks about Cesare's Italian/Spanish background, I mean that I've barely been able to find anything on the subject of ethnicity in the Italian Renaissance at all.
Anyway, this is a subject that comes up in the manga as well (ironically, making it proportionately the most in-depth look at how ethnicity affected Cesare), giving me ample excuse to explain a few things.
Basically the first thing to note is that ethnicity at this time does not really mean what we generally take it to today. There was no real developed notion of race yet--people were people and were influenced not by genes but by environment and culture. This doesn't mean that some groups of people were thought of as better than other ones. Ethnocentrism still existed and one's own people group was generally considered to be the best. These groups were different from one another and could be generalized in terms of both physical appearance and moral or intellectual aptitude. The one important difference is that these things were not biological because there was no understanding yet of dna and all that good stuff.
Traits could still be passed down to one's children, but they were passed down via cultural immersion, not genetic predisposition. Ethnicity basically meant culture. Culture was made up of religion, customs, law, and language. Typically, if you followed all of those things then you belonged to a certain culture and could be considered a certain ethnicity. Children were acculturated into these things and they were generally of the same culture/ethnicity as their parents. It was possible to change your culture, however. If a merchant moved from Florence to Naples he could make the specific changes necessary and become ethnically Neapolitan. This took a lot of effort, but it could be done. (There was no specific pan-Italian ethnicity because there was no Italian nation-state. The primary ethnicity was determined by city-state and region, although there was a secondary sense of general Italian ethnicity. Cesare would have been able to lay claim to Roman ethnicity, although he was denied both so I refer to them interchangeably.)
Society is concerned with who is included and who is excluded and this process of allowing some in and denying access in part or in full to others in how it defines itself. It has been argued that Renaissance societies were primarily societies of exclusion (although I would like to see someone explain what most societies today are because honestly I'm not seeing a hell of a lot of difference) and that they defined themselves in terms of what they were not. This meant that even if you followed all aspects of Neapolitan culture and considered yourself to be ethnically Neapolitan, if the other members of your society decided to exclude you for whatever reason, this ethnicity could be denied to you in the eyes of the majority. Even if you continued to feel that you were Neapolitan, they did not have to agree, thus for all intents and purposes invalidating your identity.
Unlike ideas about race today (people generally will not argue that you do not belong to the racial background you claim), the notion of ethnicity that Cesare is working with is very fluid but also very much dependent on others. He states at one point in his canon that he is neither Italian nor Spanish because his father is Spanish but his mother is Italian. Cesare didn't mean that he has no ethnicity because half of his lineage is from Spain while the other half is from the Italian peninsula. He meant that he has no ethnicity because he has been raised in a mixture of both cultures. If there was a large enough group of people made up of this mixed cultural background he could have claimed belonging with them. As it was, he felt that he could not claim to be Italian because his father submerged him in Spanish culture and he could not claim to be Spanish because his mother (and the surrounding majority culture) made him fluent in Italian culture as well. The response he received in canon was that he should look at it the other way--he should claim dual ethnicity since he was able to meet the requirements of both.
The problem with this, of course, is that ethnicity is not a one way street. It is one thing to claim it and it is a very different thing to have this claim recognized. Historically (and, we are to assume, canonically) Cesare was denied acceptance into either culture. The things that validated his claim to one were used as reasons to deny him access to the other. Although he studied in Italian institutions, spoke the language fluently, and practiced the religion and law as well as any other upstart noble in his period, he was denied Italian ethnicity by those he threatened. They pointed to his equal proficiency in Spanish and the cultural artifacts that surrounded him (his father had the family's rooms in the Vatican decorated in a mozarab style, for example) as evidence to the contrary. Those in the peninsula who appreciated his efforts or who were able to work comfortably with him did not call him Spanish. They were content with his claim to Italian ethnicity.
Currently Cesare feels himself to be more ethnically Spanish than Italian because he has not yet been denied Spanish ethnicity in the same way he has been denied Italian ethnicity and because of his relationship with his father. He flaunts this ethnicity in canon very much like his father does (I should talk about their relationship in more detail later...) and through his dress and relations makes it very clear that he identifies as ethnically Spanish. He still sees himself as Italian, though. It's not that he does not feel like he should be a part of that ethnicity so much as he has been rejected from the society even though he can meet the requirements of the culture and as such is verbally rejecting it as well. He would still love to be included in it and he sometimes is. It's just that he has found more acceptance among the community of Spaniards in Italy than among the mainstream Italian community anywhere in the peninsula thus far. Cesare sees himself as part of a minority and therefore is more sensitive to the needs and desires of other minorities or disenfranchised peoples--this comes out very clearly in canon. Even though he would not consider himself to be Jewish or impoverished, he can relate to their situation and takes steps to help them secure a place for themselves among the majority.
Out of the canon that has been translated into English thus far, the two places where Cesare most bares himself are where his feelings about the position of these minority groups is pushed to the surface. He feels very strongly about them because he is very aware of how he is being excluded himself. This is also why he so forcefully insisted that, regardless of his connections to Miguel and to Spain's Muslim past, he is Christian. He wants very much to be included into the majority community but he also wants to extend this inclusion to those others who have had it denied to them. I'm certain that canon exaggerates his generosity for the purpose of having a good story, but I am also convinced that the historical figure was very aware of and frustrated about his continual exclusion. The primary sources are limited but definitely point to this end.
In Camp as of the end of 2010, Cesare feels more strongly ethnically Spanish than he did before because of how he and Spain reacted to one another. He felt the soul-ping and it was much needed validation. At the same time, however, he also is coming to realize just how ethnically Italian he is. He misses Italy; he does not miss Spain. He has spent his entire life on the peninsula (and, indeed, would not end up going to Spain except to be thrown into and break out of various prisons and then die an ignoble death in a provincial battle) and Camp is making him realize just how closely he has come to identify with it. Nothing major has changed. He's just starting to look at things a little differently.
There. Done. Now to go finish Christmas shopping! o/;;