Hi Antony - welcome to the forums.

The trick here is to make it as easy as possible for the search engine to identify the geographic and language location of the site.

You've obviously done the right thing with the language because, as you say, Google.it is already identifying the pages as in the Italian language.

Now you need the search engines to understand that the site is, in fact in Italy.

Using the .it will help with this - but additionally you need local in-country in-language links to 'attach' the site to the country.

There is a lot of debate over hosting - but you should really only worry about the hosting if there is some reason why you have to stick to a .com with no chance of generating local links....

Andy