Definitely do the dolphin and whale spotting trip. That was a highlight of our holiday
They organise it so that they have someone high up on the cliffs with strong binoculars/telescope who are in contact with the boat and can direct them to where there is sea life worth seeing so you are pretty much guaranteed to see some dolphins and/or whales. There was a marine biologist on the boat and they are very keen on conservation. We saw dolphins, pilot whales and a loggerhead turtle. Then the marine biologist got very excited when he spotted another whale as it was very rare. I forget what it was though.
I also recommend taking the cable car up to Monte to look round the beautiful gardens there. You can take the "sledge" back down, but it didn't appeal to us. Make sure there are no cruise ships in when you take the cable car because there queues will be massive.
The botanical gardens are worth a visit, but aren't a patch on the gardens at Monte. Funchal itself is worth a wander around. Have a look at the market and visit a madeira winery.
Visit the Fortress of São Tiago which dates back to the 17th century.
There are loads of restaurants in the old town, which is where we stayed. I hope you like cats because Funchal has loads of strays, but the restaurant owners look after them very well.
Lastly, either hire a car or book a taxi for the day (which is what we did because we didn't fancy driving) and go to Pico do Ariero. The views from there are stunning. Our driver also took us to Santana, a rum distillery and a trout farm where we had lunch then went for a walk along one of the many levadas the island has. He dropped us off and met us at the other end.
Have a fabulous holiday.