Thank you for the responses.
I've been trying to determine if I should renew or not, but it seems that every official source I speak to, say I should be ok, yet I'm still somewhat worried.
I spoke to the Italian Embassy in Washington, and they confirmed it needs to be valid 90 days after my return date.
I spoke to Alitalia, and they said my passport only needs to be valid when I return to the US(no time requirements).
The US Department of State webpage also says 90 days after return date per the Shengen agreement of 1995:
"American citizens traveling for business or tourism are not required to have a visa for this initial entry into the Schengen area, but must have a passport valid three months beyond the proposed stay. (For a two week business trip, the passport must be valid for four months, for a two month holiday the passport must be valid for five months, for example.)"
I went to the Passport agency at the post office, and they said my passport must be valid when I return and that was the only requirement to enter Italy. They also said that since I have to relinquish my current passport, I would be better to renew once I get back rather than doing it now to ensure I have a passport when traveling.
Has anyone been had a similar circumstance, and either been stopped or allowed to board the plane?