Question: Have you ever been to Europe? Not being smartass, it's a serious question. Because those streets are VERY narrow.
CAN you drive them?
Sure, I drove a 5 ton truck through them many times. I even drove this through the streets:
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But it wasn't fun, I can tell you that (and those vehicles belonged to the Army, not to me.)
And this was in Germany where everyone is very uptight about following the rules. Italy with a more "laissez-faire" attitude might be even worse with people zipping around you just to get past.
I'd seriously consider something small and economical for your Euro Trip and then save your money and buy the PW when you get back to the land of the Big PX. Easier to drive, easier to park, easier to fuel and as other have said, all those "off road" accoutrements of the PW are going to be useless in 95% of the parts of Europe you'll be going to anyway. Europe doesn't have much in the way of "public land" like we do in North America, most of the forests are either natural parks (IOW, park your vehicle and walk or bicycle) or they are privately owned. So you would be putting thousands of miles (at HORRIBLE gas mileage) and 3 years of depreciation on a vehicle that you would not even be able to use most of the features of.
My recommendation is a euro-spec mini van. You likely won't need 4wd in Italy. Mini van is easy to park and has room for your family. If you absolutely, positively NEED a 4wd for some short excursion you may be able to rent one and then you don't have the cost, poor fuel economy, maintenance and depreciation costs to bear.