Victory over the Pumas on Sunday in Wellington would ensure Scotland extend their record of reaching at least the quarter-finals at every World Cup ahead of the October 1 bout with England in Auckland.
But the common belief in New Zealand is that Argentina will finish runners-up to England in Pool B and face the All Blacks - expected to top Pool A ahead of France - in the last eight.
Scotland have seemingly been dismissed as potential opponents for the hosts after under-par showings in the opening wins over Romania and Georgia - something which could help Andy Robinson's men.
Scotland attack coach Townsend said: "Now and again you catch the New Zealand television coverage of the World Cup and I think they're maybe reading a bit too much into our first two performances and have written us off as not getting through.
"We might use that as motivation, but we believe that these two matches are the challenges that we want to step up for.
"This is like a quarter-final already - the loser is going to find it tough to get into the next stage of the tournament."
Scotland were beaten 19-13 by Argentina in the quarter-final in Paris four years ago as the Pumas went on to finish third in the tournament.
In June 2010, Scotland exacted their revenge to claim a first southern-hemisphere Test series success.
Townsend, head coach Robinson and the players will take belief from the wins in South America, but know Argentina pose a more formidable challenge now.
Townsend, who won 82 Scotland caps, added: "Most of our players that are here were involved in that Test series.
"The players know what's needed, but we'll be reminding them this week that we need much more because Argentina are better than what they were a year ago.
"This will be a much tougher challenge than what we faced in Argentina."
Four years on from their third-placed finish in France, Argentina are just as capable.
"They have very similar strengths and are a passionate side," Townsend said.
"They've got a lot of experience throughout their team - (Rodrigo) Roncero, (Mario) Ledesma, (Juan Martin) Fernandez Lobbe, (Felipe) Contepomi - world-class players who are stars at their clubs, some of the biggest clubs in Europe."
Scotland know what to expect against the Pumas at Wellington Regional Stadium on Sunday, believing they have to be as brutal and strong as their opponents.
Townsend said: "You've got to match their physicality, you've got to have a very strong set-piece - they have a huge scrum, huge line-out, presence at the drive - but it's around the park at the breakdown that they're very strong.
"They've shown that already in this tournament against England (Argentina lost 13-9 in Dunedin) - every tackle contest they were in there with a huge hit and were back on their feet to challenge for the ball.
"They have other strengths to their game, very good back-line players, an excellent aerial threat with their kicking game, so we know we'll be tested right throughout the field for those 80 minutes."
But despite praising the Pumas, Townsend believes Scotland have got what it takes to be able to triumph.
He said: "I believe the team we've got and the players available for selection are more than capable of going out there and putting the huge performance in they will need to win this game."
There are 29 players vying for selection - tighthead prop Euan Murray is not available due to religious beliefs, as the match takes place on a Sunday - and some intriguing dilemmas for Robinson, Townsend and the remainder of the coaching team.
Townsend added: "I've been involved now as a coach for three years and it's by far and away the toughest selection we've had to do.
"We've looked at the form of the players - there's so many players putting their hands up for this game - and looking at the tactics we'll need to deploy.
"But we have got a little bit of time - 10 days between games gives us the perfect opportunity to make sure we get selection right and the tactics right for next Sunday."
Gilbert has released a new line of rugby cleats. The Gilbert Virtuo 8S is part of the exciting new product. Check it out.
The entire All Blacks apparel line has been updated for 2013/14. Check out the New Zealand All Blacks polo.
The Nike Tiempo is a solid rugby cleat and one of few styles still made from full-grain natural leather.
The Gilbert Blitz 8S rugby cleat is a great cleat at a great price of $69.99. Get a new pair of cleats today.
A cool looking all black rugby cleat with the high performance adidas is known for. Get in the Gear!
Wear the crest of the British and Irish Lions on your t-shirt. A great look for the summer.
The All Blacks Performance t-shirt is black with hints of blue from the training jersey. Very Cool.
The New Zealand All Blacks training jersey for 2013/14. Get in the Gear!
The USA Rugby Pro Alternate rugby jersey is perfect for any fan of the Eagles. Get yours to wear during the summer Test matches.
The NEW All Blacks 2013/14 jersey has arrived at World Rugby Shop. Dare to wear the colors of the All Blacks.