yes, go for it.  Best way to see the less trodden places.   Some narrow switchback roads through the small villages but fun to drive.  Rules are the same.  The roundabouts can be a bit tricky.  I can't recall who has the right of way ---the one in the roundabout or the one entering the roundabout -- as rule differs from country to country; and Italians like to do things the opposite way of others.  But you'll figure it out.  For insurance, check credit card because they usually cover insurance if the rental is charged to the card. 

I got hopelessly lost driving in Milan and had to hire a taxi to lead me to the hotel.  A last-ditch option for pathetic navigators like me.

I agree with JoanH about the confusing with directional signs. During august, you'll find a lot of traffic in the streets, be careful, in train will be more faster is you have to make a long trip.

Hmm...I disagree. I would not recommend any tourist, including an American to rent a car in Italy for a variety of reasons:

1. To start with, fuel in Italy is very very expensive. It's now almost hitting 2.00 euros per liter (USD 3.14) and things seem only to get worse with increasing oil prices, and the dollar depreciating. Also, to drive in Milan you need to pay a 2.00 Euro 'traffic tax' per journey, something similar to the traffic fee paid for driving in London's centre. Authorities are considering to add a similar tax in Rome too.

2. Cars rental is also likely to be expensive in Italy. There are many highly priced costs and taxes associated to owning a car in Italy and these are passed to the car rental customers, in addition to the rental profit.

3. A good thing about driving in Italy is the 'Autostrada' (highway) linking major cities. The problem in summer however is that you are likely to queue long hours to pass (and pay) the Autostrada gate. In your trip from Milano to Padova, for instance, you are likely to encounter many gates.

4. Road signs in Italy are only in Italian, and if you stop someone on the road and talk to them in your American accent they are likely to answer you in Italian. Remember that Italy has an aging population and that most people are not likely to have ever learnt English at school.

5. Having an accident is likely to be a nightmare for a tourist, especially when the police will find it difficult to communicate in English! When renting the car you are likely to be signing an agreement in Italian anyway.

At last, I would suggest you to use the train for inter-city transport. The train is relatively cheap, compared to the UK for example, since it's subsidies by the government. It's punctual most of the time, pretty fast, and you get the chance to talk to someone in the cabin. Chances are you will also meet other tourists on board.

For transport inside the city I would recommend your feet. The weather is beautiful (usually) and you are likely to enjoy every walk. I forbid you to use the taxi, which is again very expensive.
You may use the underground train or the bus/tram if you need to go to the other side of the city.

Mind that I may be biased towards green transport, because I want you to reduce your carbon emissions. The ideal way to move in Italy to me, is to have your own folding bicycle and take with you on the train.

Gabriele
www.simpatico.com.qa

I rented a car for one day when I was in Florence, in order to visit the smaller towns in Tuscany.  Otherwise, I used the train and my feet.  Driving in the city was extremely harrowing, to say the least.  I'm not accustomed to the fast pace and insane driving practices found in Italy, but it was worth it to get to the beautiful views in Tuscany.