Marc, NO, I don't think Papeete is that bad. We rented a car and drove around the island, and went to the market...and we hung out at the pool. I enjoyed myself so much that I am booked on my third pre cruise at the Tahiti Beachcomber.
If the prices were all the same, I might consider another island for a pre cruise, but is is so much cheaper in Tahiti! I don't think you will be disappointed.