I hadn't been to Italy for three years till last year, before which DCC wasn't offered at ATMs. But last year it was in full effect in the bank's ATMs there, and at the ATMs in Croatia.
I typically took out 500 Euros in Italy (the maximum they were paying last year), and noticed that had I hit the pay in Australian dollar option, it would have cost me about $27 more than hitting the local currency option. I tend not to use credit cards in local shops over there, as I don't know how secure things are.
I didn't get the DCC option when I used a credit card in Italian supermarkets - but often had the funny experience of the checkout person asking me for my ID to verify my signature, whereupon I'd say I was using a PIN, and he or she would say "O... il PIN" and present me with the keypad to punch it in. It was as if the PIN pad was only used every six months or so by the ccasional foreigner.
Cheers,
Renato