One thing you might want to look into is the Shadow Hearts series of games on the PS2; they propose a magically-enabled world and take place before and during WW1. They're historically shaky (by which I mean they have about as much connection with reality as a fellow who attended Cthulu's private reading of the Necronomicon), but quite flavorful. However, their world has always had magic, it's just been (mostly) under the surface.
On to more historical events! Since you seem to have a fairly solid plan for the US, and Britain is awash in possibilities, I'm going to heavily cover four nations that could make or break a magical WW1 and its postwar world: Russia, Germany, China and Japan.
Russia probably doesn't have a major revolution in this scenario. Magic would seem to favor the Russian monarchy over all other great powers, at least in Europe, since the Czars and many of their people already believed in it. Anyway, Russia was on its way to modernization and stability before WW1, with a potent parliamentary voice from the Duma and the deft politicking of Prime Minister Piotr Stolypin. Stolypin's slow death from an assassin's bullet presumably wouldn't have happened if even as little as a cure light wounds were available. Also, if either magic could cure the Czarevich Alexey permanently or Grigori Rasputin's powers were publicly and incontrovertibly demonstrated, a major popular gripe against the monarchy would have been removed.
Possible Russias:
1. Moderate, magitech Russia with a strong parliament and stronger monarchy, presumably the most powerful country in the world.
2. Hard-line, borderline theocratic Russia with very traditional magic, a major and aggressive power but not dominant.
3. Anarchic, warring-states Russia where crown, church, parliament and radicals have all established sufficient magical and technological power to preserve their existence.
Germany probably stays monarchial unless pushed in another direction by an outside power. The Kaiser and his inner circle presumably become more popular after a 'short, victorious war' with France, and barring major economic collapse, neither fascist nor communist ideologues present a serious threat. Germany, with its heavy industrialization, is unlikely to develop large-scale magic like Russia would, but many brilliant German scientists who ended up either fleeing to the US or serving the Nazis would instead serve the Kaiser's government. Germany probably comes to dominate continental Europe, barring the involvement of outside forces, but it could also stagnate as a technocracy suspicious of magical power. Perhaps even persecuting mages and magical creatures?
Possible Germanies
1. Monarchial, technocrat, industrial Germany, standing astride Europe but deeply suspicious of magic.
2. As above, but threatened from inside by mysticist rebels, led by a charismatic occultist named Adolph Hitler...
3. Stalemated, shrinking Germany, wracked by revolution and turning to a fusion of the occult and science to regain glory.
China, although already in the throes of revolution, is likely to emerge as a major power in a magical world. It has lots of citizens, most of whom already believe in magic and the supernatural; their being right gives them an edge on mastering its power. China is quite likely to abandon technology altogether, whether under the control of various revolutionary governments or its emperor. Chinese dragons, being more "civic-minded," might prop up the imperial government and even fight for China against foreign foes... an unpleasant prospect for foreign foes.
Possible Chinas
1. Imperial, mystical China ruled by a dragon-backed emperor and exerting power over all of continental Asia by the might of its immortal protectors.
2. Anarchic, mystical China, guarded against outside influence by dragons but internally allowed to fall into a ceaseless civil war.
3. Weak, backwards China, unable to use its magic to catch up with its rivals, probably divided between Russia and Japan.
Japan was on its way to becoming a major power in 1908, and the reintroduction of magic probably won't change it very much. If anything, it will make Japan even more powerful. Depending on how the US, China and Russia turn out, Japan could easily gobble up large swathes of any of those countries, supporting its magical and societal might with much needed natural resources. Considering its atrocities before and during WW2 and the fact that, unlike Germany, it's unlikely to change course, Imperial Japan is a natural fit for necromancy and demon summoning (presumably in the form of Oni).
Possible Japans
1. Dominant Imperial Japan with holdings all across the Pacific, Asia and North America, powered by high-tech navies and necromantic ground forces.
2. Constrained Imperial Japan, checked by the power of the US, Russia and China, but eager to pounce on any sign of weakness.
3. Re-feudalized Japan divided between technologically adept centralists and mystical samurai, locked in a civil war.
Other countries, like Britain, the US, and France stand to gain less from a magical world.
Britain faces magical uprisings in its colonies, which it will probably find difficult to deal with, and the defeat of its ally, France. However, as an island nation it retains good defenses and has enough power and reach to adapt.
France, without US intervention, will probably lose WW1 and be conquered. It lacks the strategic positioning to rearm as Germany did. The French colonies could become a string of allied "governments in exile," however.
The US gets pounded in this world. No two ways about it. However, it could pull through without a Depression and come out stronger if it uses its vast wealth and talented immigrant population to develop magic.
Ottoman Turkey could be propped up quite a while longer if it embraces the dubious assistance of genies. It's likely to struggle with internal divisions and greater foreign powers, however, and probably to collapse into mutually hostile states much like the Middle East of our 20th century.
Less powerful nations like Serbia or Mexico have a chance to suddenly leap forward in power, should they develop magically. Mexico, for instance, might follow the Shadowrun model and becoming a center of nigh-invincible, Aztec-inspired blood magic.
