However, he believes the competition is enjoying a renaissance after its prestige took a blow in the 1999-2000 season, when Manchester United did not defend the trophy due to their World Club Championship commitments.
"The FA Cup is back in vogue," he said.
"I think maybe it seemed to slide down the scale of importance.
"But it has regained its position as it is great competition and probably the best domestic competition in European football. I am glad to see that and I desperately want to stay in the competition.
"Blackburn will be thinking the same as ourselves but I always think winning football games is important to the life-blood of a club.
"Last season we got through a couple of tricky ties against Gillingham and Doncaster.
"They were hard games away from home to ultimately end up with a
tie at Everton.
"People tell me that losing at Everton was the start of our demise as it
was the first time we had been beaten for some time.
"I don't adhere to that really as Everton went on to beat Liverpool and reached the final.
"From that viewpoint and many aspects it probably kept Everton going. We were unfortunate to lose out and had to start all over again."
Villa will have to start all over again against Blackburn as they head into the game after a pointless Christmas following defeats at the hands of Arsenal and Liverpool.
O'Neill admits the cup could be just what Villa need to get over those two results as he felt they were hard to take.
He added: "Naturally, I've been disappointed with the two recent
"Up until Cesc Fabregas scored a fantastic free-kick we were well in
the game down at Arsenal.
"Losing the extra couple of goals at the end of the game didn't really bother me.
"People may look at the scoreline and think we were well and truly beaten but we weren't.
"We should have beaten Liverpool. They had a little spell in the second half when they had a bit of control.
"We had the better chances and their goalkeeper had a blinding match. The truth is that Liverpool had very few chances and that is why it is a major, major disappointed.
"Just when you thought a draw was on the cards the ball fell kindly for them and they score. We have to get over it.
"After that game it is probably good to put our attention somewhere elsewhere for a day or two and really try and focus on the two cup ties."
Success in the FA Cup tie would also give Villa a psychological advantage heading into the Carling Cup showdown with Blackburn.
O'Neill said: "To draw first blood against Blackburn would
psychologically do us no harm.
"If I was asked in terms of the importance of the FA Cup I would say it is a very important competition but we are, like Blackburn, close to a Wembley final."
FA Cup 09/10 Win Outright: Aston Villa 16/1