Is it necessary to hire a car PRIOR to arriving in Sao Miguel or is it easy enough to do this once there?
You can do it after arriving.
Either at the airport, upon arrival, if you think you need it immediately, or later, after installed, by asking help at your hotel, or even going to one of the agencies in town (Ponta Delgada).
There are several, but I remember one near the fortress, on the right side of the square in front of it; another on the rear of the museum; and a third one in the "Marginal", close to the highest bulding ("Solmar").
Thanks for your prompt reply Esquilo! It's members like you who really make this forum what it is!
I was at sao Miguel a couple of years ago and hiring a car was a bit tricky- especially in August. I would say, if you are going in peak season, to arrange car hire before you go. You may be lucky and have no trouble off season. When I went in August, the receptionist at the Hotel tried no less than four car firms before I struck lucky and then I couldn't get it until the following day. The trouble is the island is small with a limited number of cars and all the while tourism is growing. I would suggest that car hire will become more difficult in the future due to the increased tourism- we must remember it is an island not mainland.
Hope this helps and sorry if I am a bit of a kill joy