Izu Peninsula and Hakone

We are planning around 3-4 days around Izu Peninsula, travelling in from Tokyo, hoping to hire a car from a small town maybe Ito, driving around and staying a couple of nights each in Ito and Shuzenji, is that a good way to see Izu? Hoping to drop off the car and then travelling by train onwards to Hakone. Any other suggestions would be appreciated or anyone think an alternative route is more efficient?

We too drove around the Izu Peninsula but we had 5 days, and yes a self-drive road trip is a very good way to explore the region. There are many worthwhile destinations but due to time constraint we couldn't take in all, so with 3-4 days you have to pick carefully. Where to go and what to see depend on personal preference and available time. The time of visit also has some bearing on the itinerary. We went spring during early March and one of our main objectives in the cherry blossom in Kawazu. One thing we didn't expect though was that we encountered a brief period of snow one day and the drive was delayed for a couple of hours.

I went to Shimoda, rented a car there, then drove up the west coast. Then you can go via Chuzenji to Mishima where you can get the Shinkansen.You don't need to leave the car in the same city where you pick it up.
Shimoda has a lot to offer. There is a ropeway up to a small mountain with a great view. It is also where Admiral Perry landed to start the opening of Japan after 200 years of isolation.

True that, a car is a good way to travel. But the trains aren't that infrequent or slow. If there are only a few of you, take trains and buses might be more value for money.

I would recommend having two base cities and then cycling. Coastal cycling and through small villages are always pleasant. Especially since some of the places might not having car parking.