It is possible for a flywheel to reduce torque fluctuations in an IC engine. The reason behind this is that the rate change in acceleration [itex]\frac{d}{dt}\alpha(t)[/itex] (Jerk), can be suppressed by imposing more inertia onto the crankshaft. This can also help your engine idle easier.
\begin{equation}
\frac{d}{dt}\alpha(t)I=\frac{d}{dt}T(t)
\end{equation}
From the above simple relation we can see that if we increase I (inertia) the rate change of torque onto the crank can be changed regardless of the acceleration. This problem can actually get very detailed. But the fundamentals are there.
Basically, your IC engine will produce a force which is translated into a torque as a function of time [itex]T(t)[/itex]. You can reduce the instantaneous acceleration [itex]\alpha(t)[/itex] by changing the inertia.
This has however effects onto the performance of the engine etc.