Back to the OP's original question, yes, Article 165 was supposed to limit the maximum number of arms to match the reduced size of the German army, as specified in Article 160 (basically down to 100,000 men after March 1920).
And Article 165 was basically ignored almost immediately.
Not sure offhand what happened to the Austro-Hungarian and Italian rifles/pistols. As for Germany, I would call it "the great scattering" ...
- a good number stayed in German arsenals, regardless of Article 165
- some were modified by the post-war govt (re-stamped, turned down bolt handle, some shortened, sights replaced)
- some were converted to shotguns, others were rechambered for wildcat "sporting purpose" civilian use cartridges - 8×60, 8×64, 9×57
- some went to Turkey and elsewhere. Poland had a number of Gew. 98 rifles in its early postwar military (from both Germany and Austria-Hungary), along with various of Steyr Mannlichers (Austria Hungary). Turkey's rifles pretty much came via contract, Poland's rifles were "inherited" - Polish legions were formed in both the German and Austro-Hungarian armies (Russian as well).
- some went home with returning doughboys.