I have to agree about Sequioa Lodge. We've stayed there three times since DLP opened and the last time we went we really noticed a difference in the quality of our room. But the main areas still look fine and are probably the most atmospheric of any of the hotels. I don't think the Newport Bay costs (cash or DVC points) much more at all and it is very nice, but can get quite busy - it's a big hotel. The bedrooms are the same size as the ones at Sequioa, but the decor is much lighter and fresher.
For the bigger and plusher rooms, room service etc, you want to stay at either the New York or the Disneyland Hotel, but the prices really rocket for the Disneyland. I, personally, really like the New York. It's not that much more (again, cash or points wise) than the Newport Bay, but the rooms are bigger. The decor looks a little strange in the photos, but we quite liked it once we were staying in it!! The main areas are not much to go on about, though the Parkside Diner serves good food at reasonable (for Disney) prices. The bar does get very crowded with businessmen as the hotel also has conference facilities, but then so has the Newport Bay and the bar there is tiny!
It rather depends where you will spend more time whilst at your hotel, but generally I would say either the Newport Bay or the New York would be good.