When in Venice...
Hostels and backpackers are either nonexistent or horrible. Believe me. Don't chance this. Check out reviews from hostelz.com or ask people who have been there. You'll find yourself plied with stories about stray cats that pee on your floor and wake up on your face and beds covered with mold and rotted wood. There isn't a single good word to be had about budget accommodation in Venice. It's like a conspiracy or a plague or something.
So. your best best is to splurge. You could go extreme (two travelers I met, who had the cat experience, moved out of the hostel and into a Best Western holiday rental the next day) or you can stay within your budget and stay at the charming Hotel Bernardi Semenzato Venezia.
The hotel is located just off of the vaperetto stop Ca D'Oro making it a quick journey from the train station (crucial when you're packed onto one of those water taxis in stifling humidity, with a heavy pack and with tons of other confused tourists). It's also near shops, cafes and restaurants, with the Rialto Steps a few minutes away and St. Mark's Square a 15 min walk (give or take the number of glass shops you detour into).
The hotel is run by friendly and helpful staff, they serve a free breakfast every morning and the bathrooms are clean. I paid for a single room for about 35 Euros, but received one with two single beds and a handy sink. Prices have gone up since I visited last June, but singles should be between 30-40 Euros and doubles for 40-60 Euros.
Hotel Bernardi Semenzato Venezia. SS.apostoli, 4363-66, 30121 Venice, Italy.
Tel.(041) 52.27.257 Fax (041) 52.22.424. Email: Info@hotelbernardi.com
The view from my room fulfilled all my Italian stereotypes
The paperweight of a hotel key outside St. Marks Square
The nearest vaperetto stop, Ca D'Oro