Oh that's wonderful!

I always agree to "take them while the magic's still real" - cause then you get 'em hooked like so many of us here on the DIS!!
Where you stay really depends on a variety of factors, including your budget. Disney has a lot of really wonderful resorts on property, and there are numerous nice hotels off-property. Disney has 4 categories of hotel - Value, Moderate, Deluxe and the DVC properties, which I think they call Home Away From Home or some such term.
Staying on property you get the added benefits of Disney transportation (busses, boats and monorails), Extra Magic Hours (EMH), the
Disney Dining Plan (
DDP) - if you want to utilize that it's only available when you get a package with hotel & tickets - and of course, simply staying within the "magic" of the entire resort.
Scan through the Resorts section of the DIS to learn more about individual resorts - but of course another good thing is to just spend some time navigating the WDW site itself.
October is a nice time of year to go both weather-wise and generally crowd-wise, but Epcot can be very busy with the Food & Wine festival.
Good luck in your planning. I know that many others will offer some great advice.