My wife and I went to Venice for our honeymoon, actually. Went in the August, hottest time of the year, and I can hold my hand on heart and tell you it did not stink at all. We were told the same too!
A friend of ours lived in Venice for a year or so and they mentioned how great is in the winter months.
Just thought of another film that exploits the city's locations well - Designated Victim...