Barry's agent Alex Black claimed long-time Liverpool target Barry "will not leave Aston Villa" before the current window ends.
That will be a massive relief and a welcome bonus to Villa boss O'Neill who admits he was resigned during the close season to losing the services of the England player.
But O'Neill will adopt a softly softly approach when it comes to trying to persuade Barry to sign a new deal - a topic that was on the agenda before the 27-year-old made it clear last May he wanted to move to Anfield.
O'Neill said: "If Gareth stays with us for the foreseeable future, I will be really delighted. It will be a really big bonus for us. If Gareth is here this time next week, I will be relieved.
"I would have said only a few weeks ago that I was resigned to the fact Gareth would no longer be here - around about the time we played Reading in pre-season and when he didn't come with us to Malaga because I assumed everything would be done that week.
"But as for the future now, let's go one step at a time. That is what I would be looking at.
"I wouldn't want to be rushing anyone into making decisions or asking anyone to do something that no-one is really comfortable with."
O'Neill admits he has never had any doubts about Barry being in the right frame of mind since coming back into the side despite an average performance by his standards in the 3-2 defeat at Stoke at the weekend.
The former Celtic boss said: "Gareth will have better days for us than at Stoke with a bit of luck but Saturday might just have been a culmination of four games in quick succession, the lack of any steady pre-season build-up, and all of those things.
"I couldn't have faulted him in any of the matches he had played for us before that one and it was just maybe everything getting to him at the one time - including maybe that sharpness and fitness that he is still striving for.
"Is Gareth in the right frame of mind? I think he answered that with his performances in the games he has played for us."
Villa are expected to step up their bid to sign Newcastle's want-away winger James Milner who has handed in a transfer request.
They are understood to have had one offer rejected for the England Under-21 player in the region of £9million.
Now they look set to renew their attempts to sign a player who spent the 2005-2006 campaign on loan at Villa Park.
O'Neill thought he had landed Milner two years ago after agreeing a fee for the ex-Leeds star, but Newcastle stopped the deal going through at the 11th hour.
The Villa boss would only say: "I will tell you that we are very keen to try to strengthen our side between now and transfer deadline day.
"I am sure I could get one or two in anyway but it is just adding the sort of quality that I would want - and that is exactly what I will be trying to do.
"Am I a fan of Milner? He was nearly here two years ago. He nearly signed two years ago but it didn't materialise. But I never think anything is done and dusted until anything happens.
"So many things have happened to me as a player and as a manager that I would never take anything for granted. It was disappointing at the time but it was two years ago."
O'Neill is expected to ring the changes for the second leg of the UEFA Cup clash with Hafnarfjordur on Thursday night with Villa holding a 4-1 lead from the away leg.
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