For some strange reason, I just discovered this link on Expats in Italy and am hoping it is the key to my Italian Citizenship. What it basically states is that you can apply for citizenship in Italy by presenting all the same documents you would show the local Consulate. The process also *seems* to be a lot faster if it is done in Italy, which is surprising to me.
I have decided to give applying for citizenship in Italy a shot since I'm about ready for a career change, love live in Italy, and wish to become more fluent in Italian. So at the end of February I will move to Italy, go to the Questura and get my permesso di soggiorno, then go to the Comune of whatever city I'm going to live in and present my documents to apply to citizenship, then I will bring a document from the Comune back to the Questura and hopefully get a permesso di soggiorno per attesa di cittadinanza, then I will go back to the Comune and give them my documents to apply for citizenship. In case you weren't counting that's going to be 2 trips to the Questura and 2 trips to the Comune. The permesso di soggiorno per attesa di cittadinanza will allow me to stay in Italy as I apply for citizenship. I believe the permesso will allow me to work a little bit (I hope so at least) and after about 6 months (on average, I believe) I should be a recognized citizen.
I'll post again when I know where I'm going and more details.
A presto!