Indeed if you are healthy and a good walker you can follow Paul's plan and walk around Venice. It is not a large place and the locals are good walkers.
BUT -- if you are like me and NOT able to walk long distances or climb lots of stairs, or have seniors or little kids in your party, then it is different. I sincerely recommend in that case getting a good guide company to take care of all the arrangements for you. It was very nice for us to be at a crowded vaporetto stop and see our guide pulling up in our private water taxi! Of course this is expensive - Venice is expensive - but it makes the city so much more enjoyable!
check out our trip report and pictures at Holy Land Cruise 2007