Dunne has already become a popular figure among the Villa fans and has helped the team reach the Carling Cup semi-finals and push for a place in next season's Champions League.
His form has also helped to bring the best out of his fellow defenders James Collins and Carlos Cuellar.
Praising Dunne's performances, O'Neill said: "Dunne's contribution to the football club has been immense and consequently his help to the other players has been terrific.
"I think of one header in particular from a corner kick in Thursday's game at Blackburn. He headed from right under the bar with Chris Samba in close attendance.
"He got up above Samba, who is six inches bigger than him, to head the ball.
"It was magnificent and it epitomised his performances since he has arrived at Aston Villa."
But following the 1-0 Carling Cup win at Blackburn there is a question mark over who will be Dunne's central defensive partner for the visit of struggling West Ham.
Collins was recalled to play alongside Dunne at Ewood Park, with Cuellar being moved to right-back at the expense of Luke Young.
O'Neill offered no firm indication of his likely selection at the start of another hectic spell of games.
He added: "Collins came back into the side for the Blackburn game but overall I've been pleased with all the players.
"I've been pleased with Luke Young. I've been pleased with Cuellar who is having a great time.
"Collins only went out of the side because he was injured and since then we have been doing fine.
"I think a bit of competition for places has actually stood us in decent stead.
"We have a few options in the team which I genuinely think over the next few weeks we will need.
"We have the three home games in the space of six days including the FA Cup game against Brighton. There is no respite. There is then a league game against Arsenal and we have to be ready for it.
"This is the period when the squad will be shown whether it is strong enough or not.
"The next time we can have a breather is when there is no midweek game. I don't think that is going to happen until the middle of February.
"The way we played in the Carling Cup tie against Blackburn was pleasing. The result was also very good but we have got to try to maintain that momentum.
"There is no looking forward to the second game against Blackburn on Wednesday night when we have a big game against West Ham first.
"This is probably the crucial month of the season, but I think every single month is crucial as this is a very heavy programme for us.
"But I don't think the players would want it any other way. We are ready for this spell and everyone wants to be involved.
"There are decisions to be made but all the players will knuckle down. Make no mistake all the players we are talking about will participate in the next fortnight."
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