What did I have to consider:
- traffic volume
- easiness of getting around in public transportation or chartered vans
You could take a bus from POA airport to Gramado for about R$30, but that could affect your independence once you get there. I am sure there is public transportation, which I have not investigated yet. Gramado major attrations are mostly within walking distance, but not Canela, or the places on the way to Canela.
Parking in a Gramado can be a problem. I found a website that says they are now using parking meters. http://www.gramadosite.com.br/noticias/autor:gramadosite/id:25776/xcoluna:1/xautor:1
But if you just leave your car at the hotel lot, you can mostly walk to most of the major points in Gramado.
Anyway, I went ahead and booked a car. My next concern was the documentation. Well, thanks to this site http://gobrazil.about.com/od/practicaltips/qt/Driver-License-For-Brazil-Travelers.htm I found out that today all you need to drive in Brazil for up to 180 days is your driver's license and your passport.
We chose to rent a car in gramado mostly because of the distance to airport.
I am still investigating public transportation, and depending on what I find, I will look into canceling my car rental.
For Foz do Iguaçu, we chose to not rent a car. Our hotel will be really close to the airport and the falls, and it seems as public transportation is easily available, even to argentina.