The Azzurri, on a high after their shock win over Wales on the opening day of the RBS 6 Nations, were brought down to earth with a 37-13 home defeat by the in-form Irish.
Few give the Italians a chance of a win at Twickenham, but O'Sullivan insists they have become a force under former All Black wing John Kirwan.
"I think on their day Italy can beat anybody - if they get their game plan right and get scores at the right time," said O'Sullivan.
"I have to say that the opinions expressed on Italy are very harsh at times.
"They're a very good side now. They've a lot of strings to their bow, and I think any of the opposition coaches will give them huge respect."
Italy still have to play Scotland, their first 6 Nations scalp back in 2000. But their next two fixtures are against England and France, and Kirwan is realistic about his side's prospects.
"We've a couple of big ones coming up," he admitted.
"We will treat them as learning opportunities. We will have a good time."