especially if you're on a romantic vacation - the atmosphere is great. I remember going to the art festival every summer there when I was little. It has sentimental value to me because my mom grew up there, and I grew up just on the other side of the canyon and we always went to the beach there. Last time we were back, we stayed at the Inn at Laguna, it was very nice - down comforters, nice in-room breakfast, etc. I can't remember the name of the place we ate dinner at, but it's right on the beach, with the statue of the greeter - Greeter's Corner maybe? Anyway, we sat on the patio, the sun was setting over the ocean, and then we took a moonlight walk on the beach, ahhh..... in the morning we explored the tidepools, then showered, breakfasted and ambled around town looking in the galleries and quaint little shops, and had lunch in a nice little cafe. Very relaxing.
Newport is nice too - a less "quaint/artsy" and more "beachy" feel - the beach is bigger, and it's hopping with activity (at least it always was). I love Balboa Island - lots of little shops and cafes there too - it's really fun to walk all around it. We used to always stop and get a frozen banana at a little stand there - wonder if it's still there?
Wherever you decide, they're all close enough together that you can visit the others too. Happy Anniversary and have a wonderful trip!