The team had been determined to make a point against Ireland in their last outing after 'player power' was cited as a possible reason for the resignation of coach Mike Ruddock.
But Wales were a pale shadow of the 2005 Grand Slam-winning side, losing 31-5 at Lansdowne Road.
And though conscious they need to win on Saturday, British & Irish Lions scrum-half Peel is also concerned about the level of performance.
"When it comes to the Six Nations Championships the win is important, but we are not thinking like that, we are looking to go out to perform," Peel said.
"We were disappointed with how it went in Ireland and we have worked in training last week and this week on areas we need to work on.
"The guys are looking forward to going out there and showing what we can do. As a squad we are excited about this week. Obviously we let ourselves down in Ireland and we have got a chance to put things right on Saturday."
But Peel concedes Italy are no longer the stroll in the park they might have been when they came into the championship six years ago.
"Italy are capable of beating anyone and anywhere,' admitted 44-times capped Peel.
'They have led every game they have played in the championship this season and against France there was only four points in the game with 72 minutes on the clock.
"They are a good side who thrive on pressure and forcing mistakes, and if we give loose ball and cough up possession too easily they will punish us.
"We will need good ball on Saturday, especially up against a good, strong Italian pack and a big back row. Hopefully we can move them around a bit.
"As far as we are concerned our game is just off at the moment. A lot of things are just out and not quite 100%."
Peel goes into Saturday feeling relatively fresh after being forced to sit out the Llanelli Scarlets' Powergen Cup semi-final win over Bath last weekend.
The Scarlets wanted Peel to play but caretaker Wales coach Scott Johnson rested him in a bid to avoid a potential scrum-half injury crisis.