Firstly, a little bit of background information. The Gotek is designed to work with a wide number of computers, not just IBM-compatibles.
The original standard for floppy drives (designed by Shugart) allowed for up to four floppy drives to be connected to one controller. The controller would indicate which drive it wanted to communicate with by activating a Drive Select signal on one of four wires (typically labelled DS* or S*), then activate the Motor On signal to spin up the drive. When installing a floppy drive, you would be expected to set the jumpers correctly for the intended drive number, and several other parameters.
IBM-compatibles use the same floppy dries, but in a slightly non-standard way. It only supports two drives, and has separate motor control for each drive. (See this page for a description of the pinout for Shugart and IBM cables.)
What IBM cleverly did was get rid of the need to set jumpers on the drives by swapping some of the wires in the floppy drive cable instead. All drives for IBM-compatible systems are shipped from the factory jumpered as drive 1 (B:), but a twist in the cable swaps wires 10 to 16 (seven wires) around for one drive, which swaps the Drive Select and Motor Enable signals. The net result of this is that the drive you plug in after the twist will respond to DS0 signals (as drive A:) and the drive before the twist will respond to the DS1 signals (as drive B:).
Assuming you have an IBM-style floppy cable, with wires 10-16 twisted, you will want to set both drives to S1. You will also need to configure the Olivetti's BIOS to expect two 720k floppy drives connected.
The MO jumper is likely controlling how the Gotek responds to the Motor Enable signal. The JA, JB, JC, and J5 jumpers are probably Gotek-specific settings.
You will also need to make sure that the floppy drive cable is plugged in the right way around: the coloured stripe along the cable usually indicates the location of pin 1, but in the picture you've uploaded the stripe is next to pin 34 of the Gotek (as labelled on the PCB). A genuine floppy drive will spin constantly with it's LED lit when you fit the cable upside-down, and the computer will fail to communicate with it. I would expect similar behaviour from a Gotek.