O'Neill was unable to guarantee Cahill regular first-team football with skipper Martin Laursen, Curtis Davies and Olof Mellberg all vying for a senior spot.
Cahill, a product of the Villa academy, has flourished at the Reebok Stadium and forced his way into the England squad on several occasions because of injuries after being on the standby list.
O'Neill said: "Have I any regrets that Cahill left? No.
"He wasn't exactly kicked out of the door, but Gary got to the stage where he wanted to play first-team football.
"He felt he wasn't going to get that in the coming weeks or months on a regular basis at Villa and, if we couldn't keep him, then we don't really want to stop people from making progress.
"Bolton, Birmingham and Sheffield United were interested.
"Bolton paid us £5million for the lad plus the sell-on fee and we were happy to do it.
"He was happy to go, we are happy and we still remain happy with the situation.
"Gary wanted to play regularly somewhere and Bolton gave him that chance."
O'Neill is looking for Villa to bounce back from the midweek defeat at West Ham and is confident they will be able to cope with their fifth game in the last 14 days.
He said: "It shouldn't be a concern.
"You see the likes of Chelsea playing week in and week out, the Champions League one week, the Carling Cup the next, and they have got a great attitude.
"We don't have European football to worry about.
"That doesn't mean I wasn't disappointed with having to play four away games on the trot, particularly as the West Ham game could have been played on another couple of dates.
"But I don't think the schedule should be a problem to us."
O'Neill is optimistic that £12million summer signing Stewart Downing will be available by the end of December after receiving positive news from a specialist.
The England winger has been sidelined since breaking his foot in April in a challenge from current Villa skipper Stiliyan Petrov.
The former Middlesbrough player has got the green light to join in with full training from next week and his availability would be a big lift to a Villa squad currently ravaged by injuries.
O'Neill said: "Downing has done a bit of training and had some very good news from the specialist the other day.
"He has got the go-ahead to train and try and mix in with the lads.
"It will be like a pre-season for him because he has been out since the end of April and the news is very encouraging.
"He has got a great attitude and, hopefully, we will see the best out of him before Christmas and, by the end of the month, he might be in real decent shape.
"He is doing ball work now and he can join in with us next week when we can really push him on a bit."
O'Neill will be without Petrov and full-back Habib Beye because of suspension for the visit of Gary Megson's side.
Beye has to serve a one-game ban for his sending-off at West Ham in midweek, while Petrov collected his fifth yellow card of the campaign in the same game and has to suffer a similar punishment.
Midfielder James Milner (calf) and striker Emile Heskey (back) are also doubtful and O'Neill is keeping other injury worries close to his chest.
He said: "We have got a few other injury problems as well.
"I won't bore you with details, but we will see how things are in the morning."
Nigel Reo-Coker could start his first league game since his training-ground spat with O'Neill in September in place of Petrov after impressing as a substitute at Upton Park.
Aston Villa v Bolton To Score in 90mins: Cahill, G. 7/1