Best area in Venice to look for a hotel?

Any of the sestieri, or districts, in the historical center will do.

However Giudecca is less convenient to reach. All others are within walking distance from everything (the historical center is not that big).

San Marco is the most crowded and pricier. Dorsoduro, Cannaregio, Santa Croce, San Polo, Castello are all good. Castello has fewer tourists and more locals as you move away from San Marco. But generally tourist crowds diminish as you move away from the grand canal and San Marco square.

I would avoid the newer parts of Venice in the main land (like Mestre). It's not as magic.

Totally agrea with Roberto above. Stay away from San Marco and very close to Rialto. The rest is magic.
I was in Dorsoduro the second time, on the left side, and absolutly enjoyed it.
All of Venice as fantastic as soon as you're 300 feet from those 2 spots.
It goes from "way too many tourists" to almost the city for yourself. This place is magic

I stayed here for 3 nights and it was an ideal spot, very central to everything but not in the middle of a busy area. Only minutes to Rialto or San Marco, but the tourists would skip this "section" entirely for the most part.

Calle Scaletta 6041, 30122 Venezia, Italy
cabragadin.com

Cost less than $100 a night in May of 2016. No view or anything like that but I only slept there, it had everything I needed and was totaly safe with a 24hr buzz in. Also near a grocery store which was nice.

I like Cannaregio & Dorsoduro. I really enjoyed my stay at Al Palazzetto in May 2011, lovely quiet canal, gracious host, grocery store close by.
Al Palazzetto

I stayed in Dorsoduro last fall and loved it. It's quiet and not crowded but there's plenty of restaurants. Our B&B was Casa Rezzonico (not sure I've spelled that correctly; it's in Rick's book) -- great location on a canal, friendly owners and not too expensive.

I was going to recommend Casa Rezzonico as well. We stayed there in 2013 and really enjoyed it. Our room had a view out over a small canal and the neighborhood had a lot going on. (Ignore the graffiti. It's almost everywhere in Italy. It's an Italian word, after all.)

Here's an album I did of some photos of it and the surrounding n'hood: https://flic.kr/s/aHsjTBGc8B

At least the graffiti say "morte al fascio" (death to fascism)

Many thanks for everyone for all of your suggestions and recommendations. Very much appreciated :)