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For Italian grocery I'd go with Tony's. Great selection and better prices than Venda...plus, you don't have to deal with the crowds. I still go to Venda for gelato though!
For "best" Italian bakery? That one is much harder....there seems to be one on every block and they all have such a wide variety of stuff. Palmieri's in Johnston is very good though.
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The places mentioned so far are all nice, but pricey - if you don't mind going a bit out of the way into Warwick, I've been shopping at The Food Chalet for years - I've found them to have an excellent selection, good prices, and they have Buono's Bakery for their Italian baker - soooo good! I usually end my shopping trip with a cappuccino and a couple of biscotti to go!
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