There is plenty to do on the island that does not require a 4x4. Unless you have specific plans to go to the top of Mauna Kea (and since you will already be on a guided tour of Waipio), you likely will not need a 4x4.
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The road is unpaved but well-graded dirt for five miles, and at some points it is only one lane wide and has precipitous drop-offs, but at no point is 4WD essential. The only time you would need 4WD is during a torrential rainstorm—and in that situation, you should stay off the road altogether.
Do I need a 4wd vehicle anywhere on Kauai? No - any rental car type will get you where you need to go, as long as you stay on the paved roads. There are some road restrictions on Kauai where rental cars are not allowed, and you would need to check at the counter when you pick up your vehicle.
The road is only two lanes wide, and it winds through the rainforest, with sharp turns and steep drop-offs. There are also many one-lane bridges along the route, which can be difficult to navigate. Another danger is the potential for landslides.
We highy recommend doing a tour with large windows, an experienced local guide, and only going to safe, legal, epic spots! In order to truly experience Hana, it helps to know more about the history and legends of the area.
The roads can get a little dicey, especially if you're starting from the Seven Sacred Pools. The highway can get extremely narrow, bumpy, and turn into a one-lane road. Not to mention the local goats that have free reign. These little guys can surprise you if you're not careful.
While not the most pedestrian-friendly American city, Honolulu does have some moderately walkable neighborhoods and commercial districts near its urban core. Staying in areas like Waikiki or Downtown can allow visitors to explore parts of Oahu's capital on foot.
If you do decide to rent a car, Shaka Guide's driving tours will make sure you don't miss any of the important attractions. Oahu is the easiest island to get around. There are several car rental companies at the Honolulu Airport if you'd like to drive the island.