On one point I agree with you. There's no need to rent a car in San Juan. Taxis or walking will serve nicely. Since you are particularly interested in dining out, I'd suggest staying in Old San Juan, which has more atmosphere than other parts of the city and also has great restaurants within walking distance of the few hotels there. The only negative is that you're not close to a beach. If you want a beach, then choose Condado, which can still be navigated by foot (though for longer distances) and has a wide range of restaurants.

You have a few choices of accommodation. You say you don't wany anything "super fancy or luxurious" but I don't really know what that means. I'd prefer to have your budget and see what that tells me.

El Convento is one of the better hotels in Old San Juan, but it's both expensive and may be too fancy for you. The Sheraton is immediately across from the cruise pier. It has a casino (the only one downtown) and is nice but can be expensive. The Gallery Inn is a favorite of people on a stricter budget and might be more what you have in mind.

If you want to stay in Condado, then the Marriott will do nicely, but the Conrad is also nice, though on a smaller stretch of beach and farther from everything else. There are also some smaller places that are even cheaper.

If you do want to do excursions out on the island, you can easily arrange those at your hotel, and if you end up staying in Condado, the taxi fare to Old San Juan isn't expensive at all when split between four people.

The beaches are nicer out in Isla Verde, but it's harder to move around there without transportation. Hotels and restaurants are spaced farther apart, though taxis are available.