Does everything really shut down? We might be in Rome on the 15th wanting to head over to Florence for the afternoon and then take the Artesia night train to Paris that night. Are we going to have problems?
You might. Some smaller hotels close during this period, and some tourist attractions may not be open. I went to Milan at the beginning of August once and the city was like a ghost town. we got on some of the last tours before things shut down. Trains should run, but they may not be on time. People tend to take off, go south, and spend time with their families. There should still be stuff to do, but your selection will be limited. My advice is catch a ferragosto celebration. My family comes from a small town and they have a procession where they carry a figure of Mary out of the Church and through the streets. The men start out on their knees, they are dressed in all white, and carry chains that represent the suffering. Then, there is a big party with entertainment,food and other vendors (like a state fare or a church festival) in the Piazza and surrounding streets. It really is quite fun to watch. My suggestion would be to make the best of it, find a celebration and join in!
Hmm... you said beginning of August. Is all of Italy touch and go during August? My stays in Venice, Rome, and Florence were all scheduled to be just before and on the 15th.
The closer you are to the 15th, the more things you will find closed. I didn't have any issues when I went to Milan and Torino in the beginning of August, but by the 7th I was down at the beach with what seemed like the rest of Italy. I suspect that you should be fine because the placed you are visiting have many tourists, so not everything will shut down. The only days you might find more challenging would be the 14th-16th. Also be aware that August can be unbelievably hot, so make sure you carry a bottle of water with you!
Book your train tickets in advance. The typical advice is to buy your tickets once you are in Italy but you are traveling at a busy time when many people are on the move - this is especially true of the night train. The Trenitalia website is notorious for being difficult to use so book the overnight train through another source or a travel agent.
Our family was in Italy August 2-21, 2007. We spent a week at an agriturismo in northern Italy near Lake Garda, then moved onto Assisi for a week (did daytrips around the area) and spent 4 days in Venice. All of our previous trips to Europe/Italy had been either in June or July so we weren't sure what to expect in August. We found this to be a wonderful time to visit and found nothing closed. On August 15, Ferragosto Day, we spent the day visiting some of the small umbrian towns near Assisi and many things were open, including shops and restaurants. Our agriturismo had a b.b.q. that night for all the guests which was very fun. We did find that the traffic on the autostrada from northern Italy to Assisi via Ravenna (on a Saturday) was quite heavy particularly near Bologna. Our host at the agriturismo told us there could be traffic and it did not present a big problem. It was also quite heavy outside of Florence heading back to Venice (again, on a Saturday). Have a great trip!
An add on to my above post: This was our 3 visit to Venice. We have been there in June, July and then last summer in August. We did not find Venice to be smelly at any of these times. We had heard people say it can smell in August but we did not find this to be true.