I think it depends on what the weather is doing, really. It wouldn't be much fun to visit the Olympic National Forest if it's raining.

Would you be interested in visiting the Boeing Plant in Everett? If you go on Friday then you can take a guided tour.
http://www.futureofflight.org/

You could drive down to Mt. Rainier National Park & visit Northwest Trek on the way. That would be a whole day.
http://www.nwtrek.org/
http://www.nps.gov/mora/index.htm

If you're driving from Portland you could stop and see Mount St. Helens and do the visitor's center there - it's pretty impressive.
http://mountsthelens.com/mount_st_helens_national_park.html

The Arboretum is beautiful (weather permitting):
http://depts.washington.edu/uwbg/gardens/wpa.shtml

It all depends on what interests you most.


Waterfront

Chinatown (International District)
Seattle Art Museum
Olympic Sculpture Park

Woodland Park Zoo
Ferry to Bainbridge Island 

Safeco Field Tour
Experience Music Project
Science Fiction Museum
Museum of Flight
Pacific Science Center
Seattle Aquarium
Argosy Tillicum Village Tour
Argosy Locks Cruise


Seattle offers great shopping and musical and theatrical performances of all kinds.

You could fit in a day trip to Orcas Island or San Juan Island excpet that there are likely to be long waits for ferries on a holiday weekend. Perhaps you find some ideas here:

http://www.seattle-side-trips.com
http://www.frommers.com/destinations/seattle/32_indattr.html

HTTY

A couple of things you may not have seen in Oregon: The Astoria Column, The US 101 bridge over the mouth of the Columbia and the Spruce Goose in the Evergreen Aircraft Museum in Mc Minnville.
If you come south on 101, make a stop at the Tillamook Cheese factory.

The Folklife Festival happens on Memorial Day weekend at the Seattle Center (where the Space Needle is located) so it will be very crowded. May or may not be something you'd want to include:
www.nwfolklifefestival.org

This article on our magazine might help you out a little. http://www.stowawaymag.com/2011/12/seattle/

Thanks for all of your suggestions. I will do some more research.

I think we are going to plan to tour the Boeing plant on Friday morning. Perhaps we will then make our way to Pike Place Market and the Space Needle. Is the festival happening on Friday also?

Not sure about where to stay. I know downtown would be great, but we will have a car and I don't want to pay a huge parking fee. Can anyone suggest an area close to public transportation that will take us into the city?

Thanks for the Oregon suggestions, but we have been to all of the places except the museum in McMinnville and we won't have time for that. I would love to go back to Mt St Helens, we were there on a cloudy day, but doubt I can work that in.

Thanks again for all of your help!

With just two days, it would indeed depend on the weather, but IF you land a sunny day, then a round-trip on the Bainbridge ferry, withOUT getting off on the other side, is sensible just for the scenery.

You could always head up to "Broadway" (neighborhood/big street/east of mid-town) for lunch or dinner... and people-watching like in few other spots.

Perhaps you'd find, also, that "The Space Needle" entails more than just a ride to the top, a look around, and then down and away from "Seattle Center". There are a handful of things to do at Seattle Center, and they too should be investigated. Perhaps you'll make your Space Needle trip on the opposite day instead of the combined one you had originally planned.