Hi Meg. My fiance and I have been going to Newport for New Year's for the past five years and we love it! Especially nice are the fireworks on the harbor. We usually stay at the Hyatt on Goat Island and go to The White Horse Tavers for dinner, but that's only because we got engaged there and they know us very well. I haven't tried other places but did stop by the Castle Hill Inn one year for a before-dinner drink and the place was set-up very nicely. You will love the atmosphere in Newport during that time of year. It's so festive! I just hope that this year won't be as brutally cold as last year. Whatever you do, enjoy!

P.S. Make sure you go see some of the mansions which will be so very nicely decorated.

PPS. Boy, I should re-read before posting. That should have read "White Horse Tavern".

We are on our way to spend Thanksgiving in Mystic and Newpoert and will be staying at the Marriot, Goat Island was booked. Will be going to the Mansions for all the Christmas Decorations. They should still be up at New Years, there is a great Newport.com website with all info check it out

Castle Hill Inn is one of the best restaurants in Newport/Rhode Island. I don't think that it's too stuffy. It's expensive - but worth it!
On New Years Day, there are annual Polar Bear Plunges at area beaches. This is for hearty people who like to take a dip in the ocean on the first day of the year. Even if you don't swim, it's fun to attend.
Save the Bay sponsors trips out to Rose Island to see the seals who inhabit our area during the winter. Check with your hotel if this sounds fun to you - I believe that they leave from Bowen's Wharf. The mansions will be great to see at this time as well. You can visit the Jai Alia in Middletown for casino type slots if this interests you.
Have fun!

There is also a Waterfire Celebration in Providence on Dec 31. Check out www.waterfire.com

Seal watches are a great idea, but unfortunately there aren't any scheduled during thr OP's visit:

http://www.savebay.org/explorethebay/2003%20Seal%20Watches/Dates_times.asp

We only live ~1h north of Newport, still we're heading there for New Years for the second year in a row, staying at the Marriott. I burn most of my Marriott points at that one. Last year they had a live band in Fathoms, the hotel bar, small crowd but great atmosphere. We have 3 kids with us, and we all had a great time. We stay here a few times a year, so know a good number of the area restaurants. Brick Alley has fantastic food, I can't recall a time we didn't stop there when in town. 22 Bowens is good, more upscale, but not pretentious. We tend to save that for the summer when we can eat outside. H2O is worth a visit also. And for info - it's a great place to visit for July 4th, loads going on and a good firework display over the harbor.