Here is a fairly complete list of Italian movies available through Netflix. It's from last year, but the selection hasn't changed that much. What is or is not available through Instant Watch varies over time. As of this writing, De Sica's
Bicycle Thief and Fellini's
81/2, two great classics, can be watched instantly.
The movie titles are links which will take you directly to the related Netflix page (if you have a subscription).
A search of foreign films under country Italy will not, for some reason, return you such an extended list.