We have been to Outer Banks three times, but it has been awhile. We always went to Avon on Hatteras Island which I love. This island is going to be more laid back than the rest of the Outer Banks. We usually just hung out at the beach and played games. We always took the ferry to Ocracoke for a day which was fun. Once we visited Nags Head and Kill Devil's Hill for the day. It is more commercialized and touristy, so it just depends on what you want. I know some people really like to go north, but we never visited that part. I would like to, though.
I don't think you will have trouble finding a rental that allows dogs. I remember seeing a lot!