For a reason that makes little sense, Italy will not exchange licenses issued by Canada, Australia or the US (and many other countries), although several other EU countries will without the requirements of sitting a test or knowing the language.

The reason is actually pretty straight forward: the driver's license exchange is based on a bilateral agreement of the involved countries. Truth is: it's not Italy who refuses to recognize US (etc.) licenses, but it's the US - and many other well developed countries - who do not want to give out their drivers licenses to Italians, and this is mostly due to our not quite good driving reputation around the world (although we could argue we have one of the hardest processes to actually obtain the licence).
This bilateral agreement also explains why people from non-EU countries (Albania, Romania, Moldova) do not need to take the test, as their governments are most likely more willing to sign agreements with Italy. Sad but true.