There is no hard and fast "must" in Costa Rica; there's a lot to do in Arenal (volcano isn't doing anything currently, but there's hiking, zip lines, hot springs (pricey), and lots of activities), but other parts are perhaps less touristy. Outdoor/wildlife enthusiasts love the Osa Peninsula, for example.
Monteverde is lovely; but it is a destination (no back-and-forthing). Many people go to Arenal, then Monteverde, then the coast for the beach.
We've always rented a car and had very good luck with Europcar and Solid (reasonable prices, good service; there are myriad threads here and elsewhere about rental prices and mandatory insurance, so you won't be surprised).
You could also skip Arenal and go straight to the Monteverde cloud forest; there are many hikes, ziplining, etc. there (no hot springs, though). Many people do ARenal and/or Monteverde, then Manual Antonio National Park; but 5 days really isn't enough, so choosing 2 is optimum.
Yes, you will want to stay close to the airport the first night (get your car in the a.m., many agencies will bring it to your hotel; Eurocar did this for us at no extra cost).

I agree with sylvia that both Arenal and Monteverde are destinations, not midpoints. Both spots are good for wildlife; it'll depend on where your interests lie, cloudforest or rainforest. With only five full days, I'd choose one. Arenal, and Monteverde I hear, are indeed touristy, so choose your accommodations and activities carefully. If you love wildlife, a Cano Negro tour from Arenal is a must-do!

Alternatively, you could book a 2-night tour of Tortuguero (we love the Watsons for guides), which will pick you up and bring you back to San Jose. and visit a less-crowded cloud forest closer to the city, or/and Arenal.

An alternative to driving is a tourist shuttle, such as Interbus.

Tortuguero plus Sarapiqui might be a better fit. More nature and especially wildlife, a lot less tourists than the other two. Much easier to get around as well.

Yes, Sarapiqui - awesome spot!

If you had a driver, you could have him pick you up and take you to Arenal your first night. We've done that before when we've gotten in late, and it is nice to wake up and be in Arenal that first morning. That's a great area. Some things we like are the waterfall hike, the Hanging Bridges, the natural hot springs like Eco Termales or Tabacon, Proyecto Asis animal rescue center, ziplining at Sky Trek, and white water rafting with Rios Tropicales. Both Sunset Tours and Desafio offer a lot of tours in the area if you want to explore those. The Cano Negro tour is nice for seeing wildlife, and the Penas Blancas is a nice river float. We used Desafio's Jeep Boat Jeep service to go from Arenal to Monteverde, and it saves you from driving on that bumpy road and cuts a little time off the drive since you cut across the lake. Monteverde has nice hiking in the cloud forest, quetzals, ziplining, and some nice night hikes like the one at Hidden Valley. I totally agree with everyone else. It's better to just stay in your destination vs. doing day trips or staying at some mid-point.

We get in at 9:30 pm, planning on renting a car either spend the night in San Jose or Alajuela. Get up early and hit the road with hopes to see the Poas Volcano,. La Paz and continue my route to Arenal. Is that too much ? Will I get to Arenal before night ?
2 -3 nights in Arenal ? 1 Night in Monteverde ? Can someone recommend a Hotel In Arenal near activities. I was looking at Baldi but it might be too far ?
We leave Tues Midday so we would have to spend the night again in Alajuela or San Jose.

You could spend the night at Orquideas Inn; it's very comfortable, reasonable, great breakfast is included, and close to the airport (but I STRONGLY recommend that you have them pick you up from the airport; Alajuela, esp. at night, is very tricky to drive). http://www.orquideasinn.com/
Get your car delivered early the next morning, and the road to Poas is right outside the gates of Orquideas. If you want to see Poas and La Paz, you'll want to go early to see the crater (before the clouds arrive); from there you go to La Paz and continue on to Arenal (I assume you're going the back route, north, then west, coming into La Fortuna from the west).
Note that the road from La Paz to the main highway is driveable, but construction made it bumpy and slow when we were there (in January). http://www.waterfallgardens.com/map_directions.php (if you have any questions about the road conditions, ask them; they were very helpful via e-mails). It's a full day, but you can certainly get to La Fortuna before night.
There are many many places to pick; lots of new establishments, too. Check them out on a map: hotels.com is a great start.
If you want to go to Monteverde, the drive will take 1/2 a day, so if you want to do activities, such as zip, or a couple of hikes, 2 nights would be better (at least one full day).
We've really enjoyed the location (and price!) of this place, located on the outskirts of town on the road to the national park: http://www.lospinos.net/ The owners speak great English and are incredibly helpful and knowledgeable.
When you leave, staying at the same place (Orchideas) would be ideal; have the car picked up, then take the very reasonable shuttle they provide to the airport. (Really, I'm a wizard at maps, but we've gotten lost twice trying to get through Alajuela; and I wouldn't want to attempt San Jose at all, the traffic can be horrific.)

BTW, you could leave the Arenal area very early, get to Monteverde mid-day, do a hike in the park, then another activity the next morning, and then drive back to Alajuela, having stayed 1 night.
About four hours to Monteverde from Arenal, and about 3 hours from Monteverde to Alajuela. http://www.monteverdeinfo.com/northwest_cr.htm

BTW, these all are gorgeous drives!

I forgot: if you are going to Monteverde, a 4WD is a must; it would also be helpful for the stretch of the road repair around La Paz Waterfall Gardens.
If you have major cc coverage, be sure you bring proof of it, and then you don't need to pay the (extra) insurance. Get your estimate without that coverage in writing.

Take a look at Silencio del Campo in the Arenal area; it's a popular spot. We stayed at Fonda Vela in Monteverde and really liked their new junior suites. I wouldn't go to Monteverde unless I could spend two nights there. It's a pain to get to since the road is kind of rough. I wouldn't want to stay one night and then turn around and leave. Since you said you love the country/nature/wildlife, I'll throw in the Lost Iguana as a suggestion for the Arenal area. We love it there, but it's not close to town if that's important to you. It's near the lake and next to the Hanging Bridges. It has gorgeous grounds and a beautiful volcano view. Arenal is worth at least three nights if you can fit it into your schedule.

LOVE Lost Iguana; there was another Groupon recently, and there's also currently a contest for a free stay: http://medjetassist.com/ithappenedtome
Just make something up!
Also, through Nov. 15, it's stay 2 nights, get the 3rd for free: "May through Noviembre 15, 2012
Pay 2 nights and get one free night." http://www.lostiguanaresort.com/navegadores/eng/news.php

Thank you all for the great advise ., I'm kinda overwhelmed trying to decide ... I want to see it All !
But I don't want to be rushed either trying to see as much as I can when at the end I'll end up seeing nothing sorta speak .
Those of you that have seen most of it within those regions ., should I just skip Monteverde ? Spend my first night in Alajuela and the rest in Arenales ?
I know I'll want to go again and when I do I can see other parts of Costa Rica.
So will I have time to see both Poas and enough time at La Paz to head out to Arenales ?
I hope to see Tucans , Hummingbirds , birds in general , wildlife and of course the amazing waterfalls and sights !
1st night -Alajuela
Day 2 - Head towards Arenales ., stopping at Poas , La Paz ... Would I have enough time to see Sarapiqui ?
Day 3 - Cano Negro
Day 4 - hanging bridges , what else ?
Day 5 - what can I do before heading back to Alajuela ?
Day 6 - head back home

I'd definitely throw in the waterfall hike in La Fortuna/Arenal. It's gorgeous, and there's a beautiful crystal clear river at the bottom. If you like nature, it's a don't miss for me. And you should check out the hot springs one evening. If you go to the Waterfall Gardens, they have hand feeding of the hummingbirds at certain times, and it's really cool. They land right on your hand and drink nectar from little tubes. The Cano Negro tour is great for wildlife spotting; we've seen monkeys, sloths, caimans, and lots of water birds there. If you want to get close to animals, go to Proyecto Asis rescue center. You can feed monkeys, sloths, etc. Are you interested in any adventure activities like ziplining or rafting?

Thank you both for the suggestion for the Orquideas Inn and the Silencio del campo ! Just what I was searching for ., now all I need to decide is whether to spend my time in Arenales or venture towards Monteverde too . Hoping to hear more suggestions and advise !
Thanks again , I'm so excited !

It's Volcan Arenal (and Lake Arenal), and the town at the bottom is La Fortuna. You could spend the whole time there; there are many tours from La Fortuna.
Poas and the Waterfall Gardens to La Fortuna and your hotel will be a full, but gratifying, day; I wouldn't try to plan more than those stops. It is not that far from La Fortuna to Sarapiqui (1.5 hours?); perhaps save that for another day?
The day for the hanging bridge hike (the one near Lost Iguana is very nice) can be split into morning for the bridge, afternoon for the waterfall hike, or other (hot springs? Zip line and Butterfly Garden?)