Venice has as many tourist traps as any other old European city. But you can easily avoid them. It is not a tourist trap per se; there are many residents going about their normal lives.
Not too many residents … under 50k. Many regular folks can’t afford to live there anymore- like many, many places. The old artisans are gone, replaced by generic mass produced nick-nacks. The majority of apartments are tourist rentals, and even the quiet neighborhoods are becoming less quiet.
It may not be a tourist trap, so to say, but it is treated like an amusement park and not respected as ancient city/settlment and community as it should by many of the visitors.
Having said all that, it is also one of my favorite places to be. I’ve been lucky to have family there and be able to visit a fair number of times of the years.
Oh absolutely. For all it's modern flaws, it's still worth it. Though as someone else said, avoid it during the height of summer and it isn't too bad. The first time I went with my family was in August and it was, interesting, but the second time I stopped through on my way to Croatia in December and it was pretty rad.