I travel to Peru quite a bit - almost 40 trips over the last six-seven years. The Larco Mar area is nice to visit and the Marriott is right across the street. However, if you are looking for a more Peruvian experience I would stay somewhere else. The only people you will see at the Marriott will be foreign businessmen plus it is very expensive. I typically stay in the San Isidro area at Hotel Las Palmeras (phone 422-3887; Avenida Las Palmeras 240). Nice place in a nice part of town with a good restaurant. While in Lima plan to make a trip to the Indian Market (all taxi drivers will be able to get you there). There is a lot of junk sold there, but also some really nice stuff as well.

I have been in and out of Arequipa a bunch of times. Definitely recommend the trip. A lot of Spanish style colonial buildings and neat cathedral on the town plaza. If you go stay at either Hotel Jerusalen (24-4481) which is off the plaza, or Hotel El Portal (21-5530) which is adjacent to Cathedral Blanca on the plaza.

As for the altitude in Cuzco, it will probably bother you. Best thing to do is take it very easy the first day or so. I work at altitude often in Peru and it just takes a day or so to adjust. Really no getting around it, especially if you live at a lower elevation. If you come down with a bad case of altitude sickness the only remedy is oxygen and moving to a lower altitude quickly.

PS - avoid Ayacucho. Just not a place for a first time visitor to Peru.