If we take the general form for Aryan used amongst the early western and southern IEs to be of the form:
H e [l/r ] where H represents the H sound as in Harold ( often dropped )
e is a front vowl
[i/r] represents a sound between a modern l and r . You hear it in the
Chinese 'flied lice' and Japanese 'pranes frying'.
CF Helenes, Erin, Iran, Armenia illyrium
This CVC root is often followed by a suffix meaning the people or of the people but in the LOCAL IE dialect. So that for the italic people, as a nation as opposed to a tribe, we could have:
HI[l/r] + talis
meaning Aryan of such a kind = belonging to the Aryan peoples.
Now as in general the H will be dropped but more importantly if the [l/r] is absorbed by the I vowl or more likely the t, we have:
Italis from which the later Latins would form Italia the area, and Itali orum the people