Unfortunately we have never stayed on a canal in Venice as you pay for the view. We have always resorted to B&B's and the one we are fond of is B&B You and Me. It's not on a canal but the place is wonderful. I did, however, do a little digging and came up with a few places that are on canals that get good reviews and seem reasonable, at least by Venice standards. Hotel al Ponte dei Sospiri is located near Piazza San Marco so it could be an option. On the Grand Canal try Hotel Palazzo Stern, Sina Palazzo Sant'Angelo, and Venezia Palazzo Barocci. They are all on the Grand Canal and close to a Vaporetto stop. Keep in mind that seeing Venice involves lots of walking, crossing bridges, etc.