For the sake of completness, came back from Corfu last night, haven't really got back to the reality of everyday life yet, anyway.
I did rent a Scooter (40cc) at Space Bikes (also recommended by my travel agent) for 4 days. I can't say that the roads were that bad, yes there are a lot of holes and other stuff in the road, but with carefull driving and a little practice it's no problem. After about 2 days of carefull driving I had no problems reading the roads and traffic and was comfortable with the handling of the Scooter.
One key note here would be to not drive any faster than you feel you can handle at any given situation, it's not the others driving by you that is doing your driving, if they wan't to drive insanely fast, that's there decition.
What was more of an issue for me was the steep down hills, since this reqired a lot of effort using the brakes and since the Scooter had auto gear shifting it was not possible to engine break. This was a bit tiresome since you had to work the breaks all the time.
I would also not even consider driving without a crash helmet. Several tourists were driving with there helmets strapped to the bike, that's just stupid! And I also have to say that Scooter is THE way to get around on the island, very practical.
(...now I only have 641 photos to go through.)