Port Townsend is a very pleasant place, both to visit and to live. It is located in the Olympic Mountains rain shadow, though it gets more rainfall than Sequim.
Google Answers: Reference, Meteorology (sp?)
The charm and uniqueness of Port Townsend is due to more than its well-preserved Victorian-age architecture and delightful homes and gardens (which have annual walking tours). Port Townsend attracted artists and hippies, in the 1960s, who formed the town's unusual culture.
Port Townsend's culture is creative, comfortable, and casual. It's common to see people strolling down the street in sandals, peace sign, and an artistic, handmade hat. Both men and women, of all ages, often wear long hair. Port Townsend has a new-agey, "I just feel like it" ambience, without the trendiness of CA. Nobody is out to impress anyone else. People do whatever feels good to them, and that's cool.
Port Townsend has many art galleries, including art glass, textiles and clothing, jewelry, and superb handmade furniture. Of course, it's on a smaller scale, than Seattle, but it's still very nice...and more casual, easier to see and get around. The Rose Theater plays foreign and art movies. There are plenty of nice bistros and restaurants.
In my 4 years, living on the Olympic Peninsula, I have only seen one pair of high-heeled shoes...and it wasn't in Port Townsend :-)!
If you are planning to visit Port Townsend, you might like to attend one of the music festivals, such as Centrum or the Olympic Music Festival.
Port Townsend Music Festivals and Musical Groups
If you are planning to move to Port Townsend, well...it's very, very nice. You will have to look carefully at the job situation (long commute, to Seattle, and relatively few local jobs) and the high cost of living.
You also asked about places near Port Townsend.
There are three towns, on the North Olympic Peninsula. From east to west, they are Port Townsend, Sequim, and Port Angeles. Each has a unique culture.
Sequim, in the heart of the Olympic rain shadow, is a home for retirees, many of whom are ex-professionals. Sequim is clean and well-kept, basically a bedroom community. It is more polished than the typical small western town.
The city council appears intent upon transforming Sequim into a shopping center. Many residents resent the high-handed way that the council is dealing with the resident elk herd, which wanders freely, along the edge of town. These elk are quite acclimated to local walkers (and our dogs), but they aren't compatible with new, suburban development.
Sequim is not as interesting as Port Townsend, but it is easier to get around (shopping, library, churches, banking, etc.), on a day-to-day basis. Sequim-ites are friendly, but you won't find many walking around in funny hats ;-). If you are a more conventional type, living in Sequim may be somewhat more compatible, with your lifestyle.
Sequim has a very nice, annual Lavender Festival.
2007 Lavender Festival in Sequim Washington
Port Angeles is a working town. Much of the town's architecture appears to date to the 1950s and 1960s. The cost of living is lower than the other towns. Recently, a Port Angeles resident wrote to the local newspaper (Peninsula Daily News) deploring that Sequim is becoming "plastic," and hoping that Port Angeles will stay "real." Sequim is unpretentious, compared with many other locales, but it's impossible to underdress in Port Angeles ;-).
Despite its funky appearance, Port Angeles has its share of culture. There is a nice art museum and sculpture park. The love of music is deep and remarkable, for a small town. There is a Port Angeles Symphony Orchestra. International acts perform, at the high school, including the Irish Tenors and the Harlem Gospel Choir, to sold-out audiences. Thousands came to see the Port Angeles High School production of "Fiddler on the Roof," a significant proportion of the entire population. There is a weekly column, in the local newspaper, dedicated to local musical performances.
All three of these towns are right on the Strait of Juan de Fuca, which moderates the temperatures. All three are quite close to the Olympic Mountains, with plenty of hiking trails. The summer weather couldn't be more delightful. The scenery is often splendid, with views of the mountains and the Strait, in one vista.
I don't know anything about the San Juan Islands.
Wendy