We stayed at relatively inexpensive Locanda Leon Bianco with a view over the Grand Canal towards the market in May 2001. It was fantastic watching all the traffic, and sitting in the window with a glass of wine toasting people as they passed by on Vaporetto #1 probably wishing they had a room with a view over the Grand Canal. Noise was not a problem. We stayed three nights. We may or may not go back to Venice (there is so much more of Italy we still need to see), so I'm very glad we had A Room with a View. ;^) Also, I don't think I've ever read any complaints of fog spoiling their Venice stay and I've been reading/contributing/planning trips on this site since 1998!

Can anyone recommend smaller hotels w/views of picturesque canals not as 'grand' as the Grand?

I stayed at the Londra Palace in mid January a couple of years ago (first wedding anniversary). Our room was at the front of the hotel and had a lovely view over the lagoon (rather than over a canal). The weather was just glorious - cold, but with a beautiful clear, blue sky. I loved the view - my regret was that the window wasn't full- length to enable me to sit down and take it all in.

look into Locando Leon Bianco. You get a lot for your money.