I can't comment on the ferry from Port Angeles specifically, because I usually take the Tsawwassen Ferry from the BC Mainland to get there. My daughter lives there so I do go fairly often. Since the ferry you're taking (if I recall correctly) goes into the Victoria harbour, I think I would leave the car unless there is somewhere you want to drive to that is outside the city (or if you just want the cargo room to bring things with you). It depends how much you like having a car, I often stay in mine on the ferry and while waiting for the ferry too, so do prefer it to going as a walk-on passenger but it is significantly more expensive taking my car. If you're planning to just explore downtown Victoria and the waterfront area that can be done by foot.
If you take a rental car I would make sure you can pre-book with the car so you don't have to wait extra sailings to get there or back. I would just take the car insurance offered by the agency unless you have a credit card that will cover it. Credit cards are widely accepted so I probably wouldn't even bring local currency. Victoria being such a tourist destination (including the cruise ships coming in from Alaska), stores will have US exchange rates everywhere and no one will complain if you decide to tip in USD.
My guess is it would be crowded, not just because it is Canada Day, but because July is just generally busy. Unless you really want to see it on Canada Day, I would probably be more loose with my plans so it could be weather dependent (either that or take an umbrella), the first week of July can still be hit or miss.
Your US Passport will be sufficient but also have your drivers licence on hand in case you're young enough to get asked for ID when ordering alcohol or buying it to bring home. "Young enough" is that you look 40 or under. BC wines, spirits, ciders and craft beer options are fantastic (and some of the bottles look just plain beautiful) so I would consider bringing something back or at least sampling some when you're in the restaurants.
As for hotels, Marriott Inner Harbour is a great location for walking and I've stayed there recently, the lounge is just ok if you have Bonvoy status to use it. For the Fairmont Empress I would stay it depends on your room type. I have not stayed recently but I seem to recall them having some older traditional rooms and some really nice ones at considerably higher prices than the base rate. Generally speaking, it will be overpriced compared to other options and the parking rate may be more too. Your USD will go far, but the hotels are still going to be charging for parking if you decide to take the rental. If you're not married to a certain hotel brand, I have had many great stays at Inn at Laurel Point. Not really on the radar of many as it is not a big brand, but a variety of great rooms including ones in (my favourite) Erickson Wing, with large patios facing the harbour. Fantastic restaurant too, easy parking and still very walkable to everything with being just a few blocks away from the crazy-busy areas.
I will be staying in the Delta Ocean Pointe next month so can weigh in on that one later. Generally though, as it is on the other side of the harbour you will always be walking across the bridge to get from your hotel to the main tourist sights. It will only add a few minutes on to your walks, so if you like a quieter area (or it is a better deal) then it would be a good choice too. I have been to their restaurant for dinner, and the happy-hour there is very popular with locals.
I do recommend that you make your dinner reservations in advance if there is somewhere you want to go specifically. They have lots of restaurants but they have many that you just can't get a table at without a reservation or they may have long lines. Victoria has a lot of great breakfast places too, so I would work that into my plans for the following morning.
Canada Day or not, Victoria is a lovely place to explore for a weekend. Enjoy your time there.
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