Megson has heaped praise on the 27-year-old, who joined Wanderers in January 2008, and hailed the impact he has made on the team this season.
Bolton face Portsmouth on Saturday, the club where Taylor was idolised for six years before moving to the Reebok Stadium, and Megson predicts it will be an emotional return.
"Going back to Portsmouth is a huge thing for him because he was so popular," said Megson, whose side are 12th with 37 points. "It will be very emotional for him.
"He even came to see me to ask if he could be captain for the game but unfortunately we had to say no, Kevin Davies is the skipper."
Although Taylor has scored 10 times in the Premier League this campaign, Megson believes it is his all-round contribution which makes him such a valuable player.
Taylor himself has recently said he is playing the best football of his life at Bolton, and Megson agrees.
"He's been brilliant since day one," he continued. "To get 10 goals from outside left is terrific. He's also created a lot with his set pieces.
"We can't ask any more of him. Even without the goals and the things which are catching the eye at the moment, he works his socks off.
"Just by virtue of that we'd be happy, but the fact he's got 10 goals and plays wide left is a great testament to his quality. I doubt anybody in the Premier League works as hard as he does.
"He seems happy here. He's come up from down south and taken a little bit of time to settle in but he and all his family seem happy with life up here and we're delighted with him."
Taylor was briefly involved in the England Under-21 set-up early in his career but has failed to win a senior call-up despite consistently
impressing and scoring a number of spectacular long-range goals for Portsmouth and Bolton.
Megson was vague about his chances of breaking into Fabio Capello's squad, however, adding: "He wouldn't let anybody down but there's a few English lads who wouldn't let anyone down.
"If you want an outside left who's capable of skipping past full-backs time and time again and getting crosses in then that's not Matt.
"But if you want someone who drifts in off that line, who can finish with both feet and puts in a real shift up and down that side, gets goals and creates goals, you don't get much better."
The goals have been flowing for Bolton in recent weeks - but at both ends. Megson knows his defence must tighten up against 14th-placed Portsmouth, who are unbeaten in their last four.
"We're never really recognised for the amount of goals we score and we're quite pleased, without being ecstatic," he said.
"But the problem we've had is that although we're scoring goals, we're still letting in way too many and we're letting in goals of a similar nature and don't seem capable of stopping it at the moment so we must do that."