It would be crazy to take that much money to Italy unless you were going to need it immediately on arrival to pay for a cash-only apartment rental or something like that. There are ATMs you can use if it turns out you need more than a modest amount of money. If you take a huge wad of cash, you'll have paid a lot in unnecessary exchange fees at home, you'll have to pay again to convert the excess back to dollars and you'll have to protect all that cash as you travel around. It's definitely not a winning proposition.
I spent 9 days in Venice last fall and 20 days in Rome earlier this year. The only times I remember absolutely having to use cash rather than a credit card were in paying the city tax to my hotels (a few euros per day per person, but I assume your tour is already covering that) and when I bought city transit tickets from a tobacco shop or newsstand (credit card is fine when you buy tickets directly from the transit company).
I noticed that locals seemed to pay for gelato with cash, so I opted to do the same, and I also paid cash when I bought just one or two pieces of fruit from a little shop. I don't know what would have happened if I had tried to use a credit card to pay for a banana at a little corner store--it might have been fine, but I sort of doubt it. Italy isn't yet a country where it's common to see "cards only--no cash" signs.
I carry a water bottle around with me rather than buying a new bottle every time I get thirsty, I never have more than one gelato per day, and I usually walk rather than taking transit, so I use less cash than average. For myself, I'd probably start with 50 euros and just go to an ATM if I needed more. You may want to start out with a bit more than that, but remember there's a cost to change the excess back to dollars if you don't spend it all, and if you cross paths with a professional pickpocket, you'll be very glad you didn't have much cash in your wallet.
I bought a vaporetto pass due to the length of my stay in Venice, and I bought it from the little tourist office at the train station rather than a machine at the vaporetto dock, but I've never heard of a problem buying single tickets. Be aware that a single ticket costs 9.50 euros, so you might consider whether you'd do better with one of the passes: 25 euros for 24 hours, 35 euros for 48 hour, or 45 euros for 72 hours. There's also a 168-hour (one-week) pass for 65 euros.
There are some small vaporetto stops where there's no way to buy a ticket, so there is some risk in wandering around with no ticket or pass in your pocket if you think your feet may give out with little warning and you'll want to head for the nearest vaporetto stop. I think some of the largest stops have a staffed counter in addition to a vending machine.
