The road from Los Cabos to Loreto is excellent by Mexican standards: the shoulders may seem a little narrow at first but you'll get used to it. The quickest way is to go North towards Todos Santos (instead of Highway 1 through the Cabo Pulmo area, which is more scenic).
Renting a car from a reputable agency in Baja is not much of a problem. At Los Cabos airport, I'd recommend Avis - Hertz is outside in a strip mall away from the airport.
If you have a 4WD or a high-clearance vehicle, there is a great dirt-road option about 25 miles south of Loreto that will take you to Ciudad Insurgentes to rejoin Highway 1. the lonely planet Baja has information on this - you can make stops at cave painting sights and its pretty cool. I'd do that on the return trip, if possible.
Loreto - at least up until last May when I was last there - has service from LAX on Alaska (not daily). There is also a Hertz at the Loreto airport, which I've had good experience with.