What is the Most Correct Minhag and Nusach?

In Italy there were a few Torah centers, and it could be that there were different Mesoros there. We do not know what were the Minhogim in Italy at the time of the Ge'onim, very little do we have known to us from that time (in Europe, unlike Babylonia).
Our Siddur is based on two Minhogim - Minhag Bovel (Babylonia) and Minhag Eretz Yisroel. Minhag Eretz Yisroel came to us through Italy, and Minhag Bovel may have come through Italy too, or maybe it came to Europe only in the later days, directly to Ashkenaz.
In the time of the Rishonim, the centers of Torah were in Ashkenaz already, as Jews from Italy moved to Ashkenaz. At that time people from Italy went to learn Torah in Ashkenaz, and therefore the most proper and well kept Halocho and Minhogim were in Ashkenaz from then on.
The Rosh (כלל כ) says that he relies on Minhag Ashkenaz, since the Torah has been with Bnei Ashkenaz since the days of the destruction of the second Temple. (You can see more about this in the sefer גדולי הדורות על משמר מנהג אשכנז).
Frankfurt was an important Torah center in Ashkenaz, and the ancient Minhogim were mostly very well-preserved there (historically).
Michael FRBSH

There aren't strict rules in this, but generally speaking - Minhag Sepharad is based fully on Minhag Bovel, and Minhag Ashkenaz has more elements of Minhag Eretz Yisro'el in it.

Michael FRBSH