Translation:I was in the capital of Italy recently.
There are also other alternate wordings with equivalent meanings — e.g. “I was in the Italian capital recently”, “I was in Rome recently”, etc. — where should the line be drawn? Since the Irish sentence is using a genitive structure which makes the governing word definite, it seems reasonable that the translation should use a similar structure if it’s colloquial in English.
"príomhchathair na hIodáile" is "the capital of Italy" - the definite article in such genitive phrases goes between the two nouns, not in front of them. ("Bunreaht na hÉireann" - "the Constitution of Ireland, "muintir na Tíre" - "the people of the Country", "Corn an Domhain" - "the World Cup" (the Cup of the World).
As "príomhchathair na hIodáile" means "the capital of Italy", "i (bpríomhchathair na hIodáile)" means "in (the capital of Italy)".
"Bhí mé sa phríomhchathair" - "I was in the capital"
"Bhí mé i bpríomhchathair na hIodáile" - "I was in the capital of Italy"