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Hi Hans!
Official government websites often way overstate the dangers of setting foot in South America! Plus, the many visitors who come here and don't have anything negative happen to them rarely write about such a non-event on the internet. Those who do get robbed often do splash the bad news about though. So the picture from outside tends to be very exaggerated. I run a Spanish school in Quito and Cuenca and so I often have to calm students and volunteers down before they arrive and after they have read the same things that you probably have read.
I often make the comparison that if there is a demonstration in say London, the US or Canadian websites will not warn against visiting the UK. But they have no hesitation about telling people that all of Ecuador is unsafe if there is any kind of public demonstration anywhere in the country. I find it quite racist! 
Having said that, you do need to be careful here. There are quite a few very skillful thieves about and most often a person gets robbed without realizing it, especially on crowded transport and busy public places. We give out safety instructions to our students that give tips on avoiding risky situations. There are precautions you can take and then if you do get pick-pocketed you can just put it down to experience and carry on a little wiser.
In general I would say that the main parts of Guayaquil are relatively safe, ditto Quito. Cuenca seems much safer in general.
Be aware without becoming paranoid, is my motto, and you will be fine!

Thank you Ecokirby
I thought that was the case but found it reassuring to hear.

Can you suggest places to stay in both Cuenca and Quito. Are there any places I should stay away from.

Hans

I live in Quito and it doesn't seem any more or less dangerous than Los Angeles or any other major USA City.  I can not speak on Canada for I have never travelled there. 

Mike

YIKES, I'm not use to large cities like LA.
Very much use to cities about 750k
I do get your point though, thanks Mike
Hans

Hans,
As far as Cuenca is concerened, you might want to stay in El Centro. It is a very charming area, safe, close to good eating and also there are a number of expat meeting venues in the area.  You might want to contact some and get their input as to the city and their experiences in Ecuador, and the city itself. The size fits into your criteria, with a population of about 500K. You can get to most sites of intrest by foot. It is a Heritage City, with beautiful architecture, and many Hotels and Hostels available. Of course, the New Cathedral is in the center of it, and is a must see. The city is in the middle of the mountains in a valley, so you are surrounded by beauty. There are 4 rivers that run through the city adding to it's natural beauty. A trip up Turi Hill is mandatory! You can look out over the entire valley, and visit the shop of Vega, the world reknown ceramist. His shop, and the setting are spectacular.
Good Luck in Your Journey
Neil

Wow Neil.

Thank you very much, exactly what I was looking for.

Sounds really nice.

Hans