Thanks for the tip Sam. We didn't end up renting a kayak though, and I definitely agree with you about the gondolas (€80 to be driven around busy canals having tourists take pics of you on every bridge...no thanks)
Thought I'd put my tips on here in case anyone else is thinking of going and is looking through the forum.
We stayed on the main island, in a small 1 star hotel near St Marks square. It wasn't the fanciest but with earplugs in you could get a good night's sleep, and it included a simple breakfast which will save you money in a city like Venice. Shared showers and toilet is standard in this city, and getting a room with a private bathroom is going to cost. A lot.
During the 3 full days there, we spent 2 walking around exploring Venice, and 1 day we bought a day pass with the Vaporetti (boat buses) and we explored some of the islands around Venice. We went to Murano which is famous for it's glass blowing industry, and the southern part of the island was very busy with tourists and souvenir shops. However, walking around the northern part we found cosy and local cafes, an incredibly beautiful and interesting graveyard and a peaceful environment. Second island was Burano, where all the houses are very colourfully painted and it's very beautiful. Instead of trying to squeeze in to a busy restaurant in the main shop/restaurant area, we bought takeaway calzones and walked down to the water to sit down for our lunch. Finally, we went to Lido which has a very long beach. It was wonderful to dip your feet in and we enjoyed wandering about the island for a few hours.
In Venice, I would suggest to get the main tourist attractions over with, and if you're there during a week day, do it then as the weekend gets much busier. We enjoyed exploring the smaller and quieter streets, and I particularly loved the northern parts of the island, as it's much more local (meaning drinks and food are also slightly cheaper) and it's quieter.
Two of our favourite places to eat were Dal Moro's Fresh Pasta To Go, very popular but worth standing in the long queue for cheap, fresh and delicious pasta, enjoyed best at the nearby square with a beer or some wine. Also, Sansovino is a take away pizza place where we went twice, the pizza was amazing, you buy it by the slice €3 per slice.
Hope this helps anyone who might go there in the future, I'd recommend the city but warn people not to have too high expectations. It's expensive and heaving with tourists (think Edinburgh during the month of August but on a small island), but the architecture is beautiful, and being close to the water on a warm and sunny Aprils day beat a lot of other places I've been to.