NanC,
First of all, regarding Hotel reservations - you could be fortunate with the "call ahead" approach, but in late May / June, I would prefer to have something pre-booked even at the expense of spontaneity. That's pretty much in the peak of the spring shoulder season, and if the economy recovers even a little, there could be LOTS of people travelling at that time of year.
As the others have said, using Mestre as a "home base" would not be my choice. I would much prefer to stay right in Venice. It's wonderful to walk around at night and "explore", after the cruise ship passengers and day-trippers have departed. Also as someone else mentioned, it's nice to be able to stop at the room during the day to regroup or have a short rest.
If I were in the same circumstances, I wouldn't bother hiring a Car for a day trip to Austria from Bolzano. If you plan carefully, using public transit will probably be a much more pleasant trip and possibly less expensive. If you do decide to hire a Car, be sure to verify with the rental agency that they allow trips to Austria (shouldn't be a problem unless you plan on dropping the Car there).
As you're going to be in the Domodossola area, you might also consider a trip on the wonderfully scenic CentoValli railway, which runs from Domodossola to Locarno (on Lago Maggiore). It's a beautiful city and you might enjoy a day trip there? There's a beautiful Franciscan Church, Santuario della Madonna del Sasso just above the town (hopefully the Funicular is repaired!) and a Gondola leading up to a ski area (the views are fantastic!) just above that.
Another location I'd definitely recommend is Lago di Como and the town of Varenna. It's only an hour out of Milan, and a beautiful spot to enjoy Italy! A day trip to Bellagio is always nice. If you're lucky, perhaps Clooney will invite you for lunch (he has a Villa on the lake).
Happy travels!