The Irish, who are missing Brian O'Driscoll and Sean O'Brien to injury, are in desperate need of victory after collapsing to three successive defeats in their warm-up Tests.
England visit Dublin intent on avenging the hiding that ended their Grand Slam dream in March and with Jonny Wilkinson back directing operations.
O'Connell knows that generating momentum for the World Cup is imperative and wants his team to begin realising their potential.
"If I say it's a must win game and we don't win, what happens?" said the Lions captain.
"When you lose games, no matter who you play for, you rebuild afterwards.
"It's an important game, there's no doubt about that. We really want to come out of the right side of the result.
"We have an excellent side, the best I'll have gone to a World Cup with. We just need to produce what we're capable of.
"We wished we'd done slightly better than we have done in the first three weeks, but that's the way it goes.
"The last three weeks have been a mix and match of players and our performances have been disappointing.
"Hopefully we can now get back on track with a big performance against England.
"If we produce a good performance against England it will stand us in good stead for the World Cup."
O'Connell understands that England will be fired by the memories of their 24-8 defeat at Aviva Stadium five months ago.
"The best way to get ready for the World Cup is to play matches of as high an intensity as possible," he said.
"It's a home game against England. We know they're up for it after what happened in March. We can't go into it half-hearted.
"It will be high intensity and good for us. Whatever happens, happens, but this is the way we want to prepare for the World Cup - as hard and fast as we can.
"After we beat England in March there was plenty of talk about this game almost straight away.
"It will be very tough, England are always very physical.
"They have a very strong side with a very good line-out. They have a big strong pack that will be physical.
"We got on top in the midfield in the last game but Alesana Tuilagi is a serious player in the centre.
"Mike Tindall is very physical and experienced. England are strong all over the pitch.
"Jonny combines a good running game with a good kicking game.
"Obviously he punishes any indiscipline and is very good at taking drop goals.
"He's good at keeping the scoreboard turning over as well."
Ireland open their World Cup against the United States on September 11 and O'Connell is refusing to look beyond their Pool C introduction.
"Ireland are better when we take it one game at a time. That's when we've been most successful. That's what we've been trying to do," he said.
"With the squad picked and everything a bit more settled, hopefully we can now produce a big performance.
"We need to focus on putting in a big performance for ourselves and the supporters before we go.
"Then we have a good long run to the USA game and we'll start focusing on that."
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