Ola,
You are correct...hotels are expensive in both Gramado and Canela. Check out: www.ondehospedar.com.br, among others...but still expensive. I might suggest that you stay in Taquara, and take one of the frequent buses to Canela for a few reais each way. But, a week in Canela? You can walk through the town in a few hours, unless you do some hiking in the surrounding hills.
The surrounding cities and countryside are beautiful, and offer some great day trips from POA, or other nearby cities. Check out the many Oktoberfests in Igreginha or Santa Cruz during the time you will be there! Bento Goncalves has many, many attractions such as small wineries and colonial products just outside of town. If you want to do some hiking, check out the canyons in Cambara do Sul. Look on-line for pousadas for more economical lodging in the different areas.
Boa viagem!
JAC