Apparently there is some mystery to the shallot. I grew up eating the shallot in the famous "Alfredo Sauce" I posted about. I have now learned that you should not substitute a whole onion for a shallot. I really trust my source. Next time you are at the store pick up some shallots.
The main reason you may not want to substitute a whole onion is the difference in size! It may just make your sauce a little too onion-y.
According to Food.com:
A member of the onion family, but formed more like garlic than onions. Shallots are favored for their mild onion flavor, and can be used in the same manner as onions. A shallot looks like a small, elongated onion with a copper, reddish, or gray skin. When peeled, shallots separate into into cloves like garlic. There are two main types of shallots: Jersey or "false" shallots (larger) and "true" shallots (more subtle flavor. Fresh green shallots are available in the spring and dry shallots (dry skin/moist flesh) are available year-round. Shallots come in three sizes small, medium and jumbo (the least tasty). The younger (smaller) the shallot, the milder the taste. Do not confuse shallots with green onions or scallions.