Diesel car rental worth it?

Nope. Not if you have to pay a penny extra for it.

Italy generally runs about a tenth of a euro less per liter for diesel and you'll get a bit more mpg. You can't drive enough on a typical two-week vacation to break even.

It depends on how far you are driving and what is the price difference of the rental and what the cost difference is in the particular country. In general, I would say that it isn't significant either way unless you are driving thousands of miles in multiple countries or you can get a diesel for the same price as a gas, in either case you would want to get the diesel.

I think diesel rental cars are so common in Italy that the rental companies are not making a distinction in their marketing or reservations. When we rent, usually from Avis, well more than half the cars available are diesel and they cost the same to rent. They are very much cheaper to operate, and easier to drive in hilly areas.

How are you going to fit 4 people in a compact car with luggage. You will need a larger car. I had an Alfa with a diesel in Italy a few years ago and it was a sweet ride.

It's much harder to find an automatic transmission (if you need it) than it is to find a diesel engine. It's astounding how little interest the U.S. automakers have shown in bringing these high-mileage, long-lived small diesel cars to the US. The Ford Focus diesels I've rented are so good that I'd buy one tomorrow if I could.
Edit: Meant to say Ford Focus Diesel Wagon with Standard Transmission. Very spacious, but there can be difficulty pulling the luggage concealer over a family-full of luggage. But you said later that you'll not really be parking with luggage in the car.

Thank you all for these comments and suggestions. They are helpful and remind me that the cost benefit of diesel is in the improved mileage over gas, not necessarily the lower cost per liter of the fuel. While the rental cost of the diesel Alfa Romeo is a bit more than a compact Ford Focus (I'm getting my price quotes from Hertz), I'm tempted to go with the Alfa because of the likely increased comfort for the 4 of us, and hey, it looks like a fun car to drive. The point about having extra space for luggage is a good one, although I'm not quite so concerned about that because we will be staying in the same location and won't have luggage with us for most of the car travel. We just need to cram people and luggage in for the drip down and back from FLR.

Again many thanks, Robert

In February, according to the monthly British AA report on European fuel prices, in Italy the national average price for a litre of unleaded petrol was €1.77. For the same period a litre of automobile diesel was €1.68. Now maybe I drive a lot more than some - maybe not - but to me 5.4% is not chicken feed. Much cheaper fuel, much better mileage (my 10 year old Honda Accord gets between 500 and 600 miles per tank) in my book makes diesel in Italy a much better deal.

Four Suitcases, Four Adults, no matter you only need it to and from the airport, get a bigger car. Or pack very light. Agree with Nigel re Diesel. We drove one all over Southern Spain last year and the fuel economy was amazing.

Why not just do the trains? That way you can actually enjoy your time traveling together rather than being crammed into a car and trying to negotiate Italian highways and signage. And you won't get lost. (This may just be a personal bias of mine, but we have hated the experience of having a rental car in Italy the few times we've done it. They really only make sense if you're going to be doing daytrips to little villages that aren't accessible by train/bus, which may be the case for you.)

In Europe, diesel is cheaper than gas. In the States, it's more expensive. We always choose a stick shift diesel in Europe.