What a wonderful gift! I think you are really going to love it here!
You can change your US dollars before you come to Canada or have it changed at most banks throughout the country. That being said most places on Prince Edward Island will accept US dollars but the rates offered are not usually as good as what you would receive at a bank. Major credits cards are also widely accepted. It is always recommended to have at least a small amount of Canadian currency on you as there are a few places that will not accept American currency or offer an exchange on it.
Black flies and mosquitoes can vary from year to year so it is hard to tell what to expect in advance. A wet spring can cause more blackflies and mosquitoes but if we have a cold winter, it can be hard on both. Both tend to be a bit more noticeable in July and August. It also depends on the time of day and where you are visiting so it may be good to be prepared just in case. I find dusk the worst time of day for them but anytime in wooded areas they will be more noticible.
July and August would be considered our warmest months! Here is some information on our typical temperatures for the month of July. I would suggest cycling in the mornings before the heat of the day and the heavier traffic. There are two paved trails in the National Park, one in Cavendish and one in Brackley. They are not that long but the views are lovely - sea, cliffs, dunes.
Enjoy your time on our beautiful island!