calling within Italy

Yes, her phone keeps the same country code, area code and number wherever she goes. If you just dial the number without the country code, you are liable to get the Italian phone of the same number.
The safest thing is to store her number in your phone as +1 xxx, then it will work wherever you are. Dialling the country coded when it is not needed does not cost any more.

If you both have US numbers just dial +1 XXX XXX-XXXX.
However you must be aware of the international roaming charges (generally $.99 to 1.29/min).
But the biggest expense is actually Data Roaming. Therefore make sure your Iphone has the data features off.
In your Iphone, before landing in Italy, go to:
SETTINGS
CELLULAR
Then:
- CELLULAR DATA (tap on the button so that it turns from green to gray)
- DATA ROAMING (it should be gray already by default, unless you tapped it to green in the past. Make sure it's gray not green).
Failing to do so might cost you hundreds of dollars when you get home, because your phone constantly uses data to check emails, etc. in the background.

The phone will still work, but just as a dumb (not smart) phone. You can still use voice and text messaging.

If you want full use of your iphone without restrictions like at home, without spending a fortune, buy an Italian SIM card for Iphone. It will cost you about 10 euro for the SIM card, and with 10-15 euro you get about 1 to 2 Gb of data for the month. More than enough for your time there.
Another option is to buy a passport plan from your US provider for the weeks you are there. I don't know how much it would cost, since I use the Italian SIM option above, but check with your provider and see what they charge. AT&T (my provider) is currently advertising $30/month for only 120 Mb of data ($1/min for voice roaming), or $60/month for 300Mb ($0.50/min roaming). Unlimited SMS text messaging with both.

Contact your mobile phone provider for what you need to know. They may have a program to discount the call cost. Your phones might not even work overseas without some manipulation. Your provider should be able to answer all your questions, including how to call and text each other as well as how to call numbers in Italy.

Russ,

It would help to know which cellular network you're both using, and which iPhone models. Some versions of the iPhone won't work on European networks.

As Roberto mentioned, if you're both using your U.S. numbers, just dial +1-xxx-xxx-xxxx. With calls using that method, you'll be paying for the call back to the U.S. which will then be bounced back to Italy. Your wife will also be paying for an incoming call. Using text messages will be far cheaper.

You won't be able to use locally purchased SIM cards unless your phones are "unlocked".

Thanks Ken, our phones are the 4s kind and we have ATT. Thank You