Arriving by ship and will only have about 8 hours. I would like to visit the area that is always pictured in the tour books and magazines-looks like a French village with lots of outdoor restaurants and shops. If I take a cab what do I tell the driver? Is there anything on the waterfront area worth seeing?

By ship, I assume you mean cruise ship? Chances are, you will dock right in "Vieux Quebec" (the old city). If i recall correctly, the port is totally within walking distance of "le Petit Champlain" and the hilly, narrow, old cobblestone streets of Old Quebec. 8 hours is easily enough time to explore the old city.
After living there for 5 months, my favourite things to do were to chill in the huge Plains d'Abraham park, run along the boardwalk near the Citadel and Chateau Frontenac and just wander thru the streets. Read up on best places to grab food.. there are a ton of touristy, French-Canadian restaurants that will disappoint in quality. Le Cochon Dingue in Petit Champlain never disappointed though.
I agree with SavvyFarmgirl in everything she says, including the places to see.
So I would just grab some food and drink from the breakfast buffet, and not spend time buying a tourist lunch ... but do try a proper coffee. I also tried Poutine there ... because I felt I had to - not sure I'll be rushing back for seconds though!

Google Maps is helpful. Search for Funiculaire du Vieux Québec in Quebec City. This is like an outdoor elevator taking tourists from the old town at river level up the cliff to the boardwalk at the Chateau Frontenac hotel, inside the city walls. The same map, if clicked to satellite view, will show a cruise ship docking just to the north of the funicular, only a few blocks away. If you walk the other way from your ship, past the yacht harbor towards the grain elevators, you can find a waterside farmer's market that gives a taste of local produce.
https://www.google.ca/maps/place/Funiculaire+du+Vieux+Qu%C3%A9bec/@46.8151283,-71.2163136,2103m/data=!3m1!1e3!4m2!3m1!1s0x4cb895dceff54475:0x7cb87550c8976cd5
Poutine is authentic 20th-Century junk food, adopted by trendy foodies. Recipe: Place cheese curds on French fries. Pour hot gravy to melt the curds. Check health insurance for heart attack coverage. Still, a Montreal chef won the Iron Chef contest with a lobster version. Each to his own taste.

Thank you for your response-and I love your humor. Will the shops and restaurants in the old town accept US dollars?
I have been brave enough to try Poutine in Canada, plus Biscuits & Gravy in the US ... this is deep cultural immersion indeed.
So if y'all get to visit Down Under, I strongly recommend trying a pie floater.
Can't advise on the acceptance of USD in Québec City, but in general, if shops do accept USD, you would get a pretty ordinary exchange rate ... perhaps better to buy some CAD on the ship or before travelling.

You do need to have lunch there - on one of the patios near the funinculaire. And it needs to be a smoked meat sandwich and beer. Sooooo good.
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