We stayed at the Paradise Pier once. We haven't gone back to a DL hotel since. Unlike WDW, it is not essential to stay "on-site" at DL. There are so many Good Neighbor hotels to choose from at a fraction of the cost. There's the Anabella, Candy Cane Inn, Hojo Anaheim...so many...
For us, we really like the hotels in Garden Grove. My fave is the Hyatt Orange County ($99). I've also found the Marriott Anaheim Suites ($99 on a
AAA rate), the Hampton Inn ($108 which includes a breakfast), and the Crowne Plaza (gotten it on Priceline.com for $50). You can't really walk to DL from the Garden Grove hotels. You'd have to either drive, take the ART or take the hotel shuttle. The rooms in those hotels are really nice, clean, and perfect for a family of 4. And if you pick a suites hotel, you'd have a spacious room with separate living and sleeping areas.
In the Garden Grove area, there are so many restaurants to choose from: Red Robin, Crab Shack, Outback, Buca di Beppo. It's also quite close to the Block at Orange where there's an El Torito and other restaurants. More often than not, we go to Mimi's Cafe for a good inexpensive meal. There also Target in walking distance where you can buy your bottled water, snacks and cereals. Also, a Vons supermarket is really close by if you want to buy some other grocery items. Next door to the Target is this amazing dollar store where you can buy some really amazing Disney souvenirs for $1.
Good luck in picking your hotel. There really are so many to choose from.