The League One visitors took a deserved lead through Robbie Simpson's brilliant strike in the 28th minute but a freakish deflected equaliser from Craig Bellamy soon after was followed by Steven Gerrard's penalty just before half-time.
Jonjo Shelvey and Stewart Downing both scored their first Liverpool goals either side of Andy Carroll's 89th-minute effort to clinch victory.
"The scoreline is a bit flattering really," said Dalglish, who made eight changes to give some of his fringe players a run-out.
"Oldham did their club and their manager proud.
"They created one or two threatening situations for themselves, especially in the first half, so getting back as quickly as we did with the equaliser helped us.
"But the scoreline does not reflect the distance between the two teams on that performance."
Dalglish gave Fabio Aurelio his first appearance of the season while the likes of Jon Flanagan, Martin Kelly, Sebastian Coates and Jamie Carragher were given valuable pitch time.
"It was important for some of the players who haven't played as much as the others to get a game and Fabio Aurelio got his first 60 minutes (of the season)," said the Scot.
"For us there were a lot of positives to come out of it: Stewart Downing scoring, Andy getting a goal, Jonjo scored and Steven got a penalty.
"They just need games. Every single one them will be better for it.
"There was nothing wrong with their application but you can train as much as you want but you can't replicate what happens on a pitch."
Gerrard marked his first start after two months out with an ankle infection with a goal and was praised by his manager.
"It is fabulous what he has done and how hard he has worked to come back - playing a full game is fantastic is for him," he added.
Oldham manager Paul Dickov felt his side could have made more of their early chances but labelled the late first-half penalty - when Tom Adeyemi was adjudged to have fouled Maxi Rodriguez - as a "joke".
"The first 20 to 25 minutes we played some decent football and we had three or four really good chances before we scored," he said.
"If you concede straight after scoring it puts you on the back foot and to concede from a deflection was a bit of sickener.
"The penalty is a joke. I thought he fell over. Tom was looking at the ball and there was no way he can see him (Rodriguez).
"They (the players) are an honest bunch and they were livid it was given just before half-time.
"I believe we could have come here and won but to lose 5-1 I am gutted for the fans and players. It is a little bit deflating."
