I was in Venice last August and thought it was a beautiful, decaying old city. I wouldn't call it a tourist trap... not more so than other famous European city anyway. Yeah, the Gondola rides are $50, but that's something you do once for the experience of doing it. Other than that, the museums, food, and lodging are actually pretty reasonable (thanks in part to the exchange rate between the dollar and the Euro).
Yes it's a sad reality that Venice's problems with flooding aren't going to go away. They're working on a floatable barrier system to help, but I think it's caught up in some bureaucracy somewhere. Sad... hardly anyone lives there anymore, aside from tourists and people employed to support the tourists. The residents all moved to Mestre (a city nearby) to avoid extremely high housing and insurance costs (plus they can have cars, which you obviously can't have in Venice).
I loved Venice... if/when you do visit, try to do so in the summer. It will be more crowded but at least you'll avoid the flooding. It's kind of like a ghost town... there are people there, but when looking at all the beautiful old buildings you can't help but imagine what life must have been like in the 1500s. All of the tourists head to Piazza San Marco to get crapped on by pigeons while waiting in line to see the basilica and the Bridge of Sighs. But to really get the feel of Venice just wander out past all the tourists and "get lost" in the back streets... simply awesome!!
l2c
Edit: ToBeMe I disagree about the "stink". It just smells like ocean water. The canals are really dirty, but IMHO it doesn't make the water smell any different than normal seawater. No one should let rumors of Venice's smell keep them from going. It really doesn't smell that bad at all.
That's truly a self made man if I've ever seen one. :Q
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