Definitely visit the Welland Canal, this is the canal that all boats (including the freighters) must use to bypass the Falls :-) I have recommended this to alot of friends who go to Niagara Falls, and none have been disappointed! Two favorite areas are the Flight Locks and the Visitor Center at Lock 3 (I think)

Welland Canal

Niagara-on-the-Lake has already been recommended and I definitely think that's good for a day. There are also the two Ports located at either end of the Welland Canal, although it's off season now for some of the shops, etc.

At the Niagara Falls area itself, my favorites are the Butterfly Conservatory, Maid of the Mist, and on the American side, the wooden walkway next to the falls (I forget the name, sorry). It is worth it to view the Falls/rapids from both sides, venturing to Goat Island on the American Side. The Canadian side is full of nature trails, etc. as you drive down the parkway.

I think you will find that your time in that area will not be dull!