Don't arrive thinking you're going to get mugged right off the plane or something. It's really not as bad, once you have feet on the ground, as you've read about. Most tourists don't have any incidents at all, or even close.

The Canal Street type place is probably the Saara market, but you'll find souvenirs everywhere.
There is a Feira Hippy on Sunday in Ipanema. There is a feira every evening in Copacabana. There are souvenirs sold on top of Corcovado and Sugarloaf for all the tchochkse, all the Christs-with-arms-out in sizes from mini to huge, you'll ever want, and more, including very high end H. Stern jewelers. There are sarongs (cangas) sold on the beach, as well as many other things (jewelry, hammocks, biquinis, etc). There are Havaiiana flipflops stores. There are handmade jewelry vendors all over on the streets, with wares put out on a blanket. There are some higher end crafts found in stores up in Santa Teresa. And on and on........