We were in Venice last October and had the most wonderful time! I can't help with a hotel in your preferred location because we stayed at the lovely Hilton Molino Stucky in Giudecca. As for restaurants, I took along this list of places that I had read about or that had been recommended to us. We never ended up eating at any of them! We would just stop at some sidewalk cafe while we were out and about exploring and we never once had a bad meal. And of course the gelato was to die for! You'll have a great time.
get yourself a copy of rick steve's italy book. Lots of great info on affordable hotels and restaurants. Also the tripadvisor Italy boards are quite informative.