Hi LT,
We recently returned from a trip to Germany, Austria and northern Italy. Picked up and returned the rental car at Munich airport. Very easy.
We've rented cars through Andy Bestor at: www.gemut.com for our last 4 trips.
Be sure to let the rental co. know you intend to drive into Italy before paying/reserving or getting a quote. Rental co.'s don't allow some higher end vehicles/models to be driven into Italy. We always have a compact and it's never been a problem.
Our car had the badge (sticker) on it. You can simply ask before taking the car.
The toll sticker (Vignette) can be bought right after leaving the airport at any highway rest/gas stop. Approx. cost is 8 Euro for a sticker good for 10 consecutive days.
For the CDW ins., we used AmEx's "Premium Car Rental Protection Plan". Cost is $24.95 for the entire rental period, up to 42 days, not per day. Make sure to use the same AmEx card for reserving/paying for the rental and at the rental counter for any local road taxes, etc.
I also get an IDP (International Drivers Permit) from AAA before leaving. It's good for 1 year. I've never been asked for it (10 trips), but better safe than sorry.
Paul