Why doesn't severe IDDM necessarily produce anomalies?

Because severity of diabetes ≠ severity of embryonic exposure at the relevant moment.
Several mechanisms appear to interact.

1. Excess glucose enters the embryo
Embryonic cells express glucose transporters, including GLUT2, and excessive maternal glucose can increase embryonic intracellular glucose.

2. Mitochondrial oxidative stress
Excess glucose metabolism increases mitochondrial ROS.
At the same time, antioxidant capacity can be reduced, including effects on glutathione metabolism.
Therefore:
↑ glucose → ↑ ROS + ↓ antioxidant buffering → oxidative stress
This is one of the strongest mechanistic links in diabetic embryopathy.

3. ROS changes developmental gene expression
This is particularly interesting for PAX3.
Hyperglycemia/oxidative stress can suppress PAX3, which normally protects neuroepithelial and neural crest progenitor cells from inappropriate apoptosis.
↓ PAX3
→ ↑ p53-mediated apoptosis
→ loss of critical progenitor cells
→ neural tube/cardiac outflow tract abnormalities.
This provides a much more plausible explanation for why one small population of embryonic cells can be selectively destroyed, rather than the entire embryo simply becoming growth restricted.

4. ER stress
Hyperglycemia also disrupts protein folding and causes endoplasmic reticulum stress.
ER stress activates the unfolded-protein response and, if sufficiently severe, apoptosis.
So there are at least two converging pathways:
Hyperglycemia → ROS → apoptosis
and
Hyperglycemia → ER stress → apoptosis

5. JNK/p53/caspase pathways
Hyperglycemia-associated oxidative stress activates stress-response pathways such as JNK1/2, followed by pro-apoptotic signaling and caspase activation.

Thus the final common pathway can be:
metabolic stress → signaling disturbance → apoptosis of selected progenitor cells → structural anomaly
Why are some embryos affected and others not?
This is probably the most important answer to your question.
There is embryonic susceptibility.

Two embryos exposed to the same maternal glucose concentration may not respond identically because of differences in:
• antioxidant capacity
• mitochondrial function
• glucose transporter expression
• developmental gene variants
• folate metabolism
• PAX3/p53 pathway susceptibility
• epigenetic state
• placental glucose handling
• timing of exposure
• maternal metabolic environment

three major metabolic pathways:
1. Polyol pathway
Glucose → sorbitol
→ NADPH depletion
→ ↓ glutathione regeneration
→ oxidative stress

2. Myoinositol pathway
Hyperglycemia
→ ↓ intracellular myoinositol
→ altered phosphoinositide signaling
→ abnormal proliferation/differentiation

3. Hexosamine pathway
Glucose → UDP-GlcNAc
→ altered O-GlcNAc modification of proteins/transcription factors
→ abnormal gene expression
Hyperglycemia → metabolic stress → altered signaling + oxidative stress + apoptosis → diabetic embryopathy
This is also why brief but intense hyperglycemia during a critical developmental window could theoretically have a disproportionate effect, while chronic diabetes with excellent glycemic control during organogenesis may not result in malformations.