In Venice I'd definitely stay in Venice proper. You cheat yourself of the real Venetian experience if you stay in Mestre or the Lido.

But I wouldn't stay near St. Mark's Square. That area can get very crowded with tourists and daytrippers. Ditto around the Rialto. Venice is not very big and it's very walkable. Somebody recommended La Calcina; that's a nice quiet location on the Zattere, and you can avoid the crowded vaporetti on the Grand Canal except when you want to take that trip -- say early morning or late day.

Hotels are expensive in Venice, 3-stars included. We last stayed at the Hotel American Dinesen, which we found very nice and well-located. But a standard double now runs up to E310. So maybe you better give us your budget.

Venice- http://www.hotelgalleria.it/