If Italy had the same kind of NIMBY laws that the US does in many places, half the country would have to get up and leave, or they would have to pave over everything between towns, leaving no agriculture, parks, forests or much of anything.
The public transportation in Italy varies a lot, from North (pretty good) to South (awful in many places). The thing they tend to do well is that it's fairly frequent, so you usually don't have to stress about missing one particular bus or tram.
"Fairly dense" is all you need to vastly improve things in many places. Look at vast swaths of the bay area that are single story detached houses. Mix in some 2/3 story buildings in there, and you'd add a lot of supply without going 'full Hong Kong'.
Also, Milan is about twice as dense as Seattle.