Good observation, Lurker.

Here's how I've always seen it: If your parents were born on the other side, you must be able to understand them. Now, how you actually speak Italian is a different story.

When I was growing up and a kid's Mother screamed something out the window for them, it was always in Italian. But when the kid replied, it was almost always in English.

Now, you remove them another generation or two, and that's how the language gets lost completely in most families.