"I think we've a lot to prove," said the Munster lock. "We've incredible talent in our side. We haven't been playing well enough to match that talent - and I'd include two thirds of the autumn in that - so we've got a lot to prove.
"Certainly there's potential for us to challenge (for the title), absolutely. I think you look at our team on paper, it's an excellent team.
"That performance against New Zealand, there's no reason why that shouldn't be our standard and level every week. And I think if it isn't, the players probably need to look at themselves. Maybe we've done that over the last few years on and off, but not consistently."
After sitting out the last Six Nations through injury, O'Connell cannot wait for Sunday's curtain-raiser at the Avivs Stadium.
His performances in the Heineken Cup and November's GUINNESS Series have backed up Joe Schmidt's decision to hand him the captaincy.
"It's brilliant to be back, it was tough last year sitting on the sideline and watching most of the games with O2 in the box doing corporate work, so it's great to be back on the pitch," admitted the 34-year-old.
"It's hard work though. Joe's fairly demanding when you're in camp, certainly in the week anyway there's a heavy workload. There's a lot to be learned and a lot to be done, so there's no real time to settle in and have the craic, you're straight into work."
With last year's 12-8 defeat to Scotland still fresh in the mind, O'Connell knows that it is going to be another battle up front.
In addition, the difficult conditions which they trained in over the last number of days should stand to Schmidt's men.
"This is one of the best Scotland sides for a long time. They have a lot of potential. We've watched a lot of last year's game which was tough viewing, and we've watched a lot of their players too over the last few weeks," explained O'Connell.
"Training in the conditions the last two days are probably the worst we've trained in in a long time. You learn a lot.
"We'd all love to play in perfect conditions, but sometimes there are days when you've just got to dig in and you need to work hard, on your kick-chase, your kicking game, you need to maul well, take teams on physically in the scrum and up front, and that's probably what we've learned over the last two days."
O'Connell highlighted that the disappointing aspect of the November internationals was that having paid so much attention to detail in the build-up, Ireland failed to carry that over into the games at times.
"There's a lot less pressure on the captain under Joe. He puts a lot of pressure on individual players to do their own preparation, both technically and emotionally.
"And it's up to the individual then on the day. One of the things that was disappointing with us over the autumn, that when Joe came, the technical and detail side of things were so new to us that we were slow to get going.
"And that will be the main thing as senior players we'll be trying to keep an eye on in this first game, to make sure that we're technically sound and from a detail point of view, sound.
"But making sure from an intensity and physicality point of view, which is probably one of the most important things in rugby, that we're sound from that point of view as well."