Reservation in Italy asking for Passport information

It's normal. When we stay in Italian hotels, they make copies of our passports when we arrive. Your apartment owner is just asking for the neessary info in advance.

Some past threads:
https://community.ricksteves.com/travel-forum/italy/rental-agreement
https://community.ricksteves.com/travel-forum/italy/passport-35-needed-for-apt
https://community.ricksteves.com/travel-forum/general-europe/providing-id-in-italy

Would you rent an apartment to a rando without firm ID? They have to provide this information to local police anyway so they would take a copy of the passport on arrival (hotels do this too -- they used to keep the passport for a day or two to do this).

This is always done when you rent. Hotels copy your passport upon arrival.

Yes, is it normal. More: is mandatory. In Italy you always have to record your guests (in hotel, B&B, apartments...). When you travel in group usually is the tour leader who has the list of travellers with all details, so you don't leave your document upon arrival. When you travel solo usually is done at the lobby.
When you have to sign a contract in Italy you have to provide some more details, like your address and (if possible) VAT number. Are needed for the invoicing. Don't be surprised if they ask that.

The US is unique as far as allowing use of drivers licenses as a proof of identity. Most countries would require your passport as proof of identity and right to be in their country.

I have no problem with providing passport information, it is also part of my Airbnb account.
IMO a driver's license is more likely to be linked to giving up personal information.

It is normal. I have always been asked for that info when in Europe. I can't recall every specific incident but I know it is asked for in other countries too.