If I'm traveling only within Italy, which currency is a better buy in terms of acceptance and bargaining power?
The only currency used in Italy is the euro now.
No lire now which is good as everything was in the 1000s - I remember getting 1000 lire for one Australian dollar!
Euros it is, but watch your change - I saw a bit of lire coinage when I was there last year. I believe there was a scam also with smaller lire notes but that may have been awhile ago.
No Lira anymore with one exception. Watch carefully before you pick up any 2 Euro coin. They look almost identical to one of the old Lira coins. Once it's in your hand, you're sunk. Whenever you get change, look at the coin closely. Make sure it's a Euro coin and not a Lira coin.
Absolutely look at the coins when you get change. I bought a bottle of water in the Zurich airport and got change in Canadian coins....totally worthless in Europe, and to me as an American tourist in Europe!
The same could happen in Italy...or anywhere in Europe. They deal with many different currencies, so guard your change!