Bit of sausage outrageous in place of carnival dish (7)
I believe the answer is:
risotto
'dish' is the definition.
(risotto is a kind of dish)
'bit of sausage outrageous in place of carnival' is the wordplay.
'bit of' says to take the initial letters.
'outrageous' becomes 'OTT' (short for over the top).
'in' indicates putting letters inside.
'place of carnival' becomes 'Rio' (Rio de Janeiro, location of famous carnival).
The initial letter of 'sausage' is 's'.
's'+'ott'='sott'
'sott' placed within 'rio' is 'RISOTTO'.
(Other definitions for risotto that I've seen before include "Italian course" , "Italian dish cooked with broth" , "Perhaps Italian" , "Italian food" , "Savoury rice dish" .)