I have two favorites, Aroa and Papaaroa. Aroa is in the South West and Papaaroa is more directly South. Aroa area has a mix of swimming and snorkeling areas, great sunsets, several restaurants in close proximity. Papaaroa, is a quieter area with beautiful beaches but not many restaurants and you can't really see the sunsets.
I would suggest staying in the Aroa area and alternate your days at the Aroa area and the Papaaroa area, with the odd jaunt down to Titikaveka for some spectacular snorkeling. For accommodation ideas in Aroa, there is Aroa Beachside Inn, Lagoon Breeze Villas or the Rarotongan Sanctuary. There are other smaller private houses as well, for those, check out the Holiday Homes site or the www.ck website also has some private homes listed.