2nd Pass at Itinerary

You do not need the car once you get to Split. The ferry from Split to Korčula is a very short walk from Diocletian’s Palace. I suggest you stay inside the Palace. Check out Hotel Peristil.
Then the ferry from Korčula to Dubrovnik leaves you at the port of Gruž. A short taxi ride to the old town. Again, I suggest you stay within the walls.
You can also ferry to Kotor from Dubrovnik and back again, or you could check out a driver from Montenegro to the airport and add that night to Split.

Where do the extra two nights fall? Or are you talking about the Montenegro nights? It’s unclear.

The additional two nights can be anywhere. If we stay in Split for one night, the itinerary adds up to 14 nights out of a possible 16; if we decide not to stay in Split (I was looking for confirmation that this was a sound decision), we would have 3 additional nights.

Gotcha, here is where I could envision the two-three days going:
1) explore more of Istria with the car
2) in Split or Trogir with day trips
3) on one of the other islands: Hvar, Brac, Vis
4) in Bay of Kotor area, but I’d avoid splitting your Dubrovnik time if you can help it

Of course there are plenty of other options as well! Let us know what is appealing to you and we can help flesh it out.

Thank you for your thoughts. I'm not sure how else to describe our interests other than what I listed: nature, moderate hiking (because we're getting older) and checking out local sites. We're drawn to Croatia for beauty of Plitviska and love the look of the coastal area though we aren't beach people (and this will be in late Sep).
We really don't want to move around too much but for instance, don't see a need to stay in the Split/Plitviska area more than it takes to see the park and perhaps the palace since we'll be nearby and as I mentioned, it would break up the longer drive. We weren't planning on adding another country (we'll start in Northern Italy before Croatia) but decided to go to Montenegro since it's so close and we probably won't be returning to the area since our goal is to see more of the world. We'd like to see the bay and the nearby Lovcen NP so thinking of stay a few nights so that we aren't constantly moving.

We may just add a night to one or two of the locations. Any specific sightseeing info you have would also be helpful. Thanks!

I just meant which of those specific options looks more appealing. You have a million options each place, but not tons of time for day trips, so more time in whichever place calls you the most is what I would recommend. You have adequate time to see each place listed, but it sounds like you would need more time in Montenegro to see the places you mentioned.
You could possibly avoid the last night in Dubrovnik by staying in Herceg Novi, which is close to the airport just over the border. I only passed by but it looked cute.
While on Korcula, I'd just tool around and relax. I have not been to Istria yet, but the hilltowns seem to be the draw.

Great, thanks for your thoughts!