We always stay off-site when we visit WDW, we try to bring snacks with us when we visit the parks, we use our BRITA water bottles and we limit our daughters to 2 souveniers each. Park hoppers are our big splurge and, if we're really lucky, airfare, otherwise we drive from Chicago. Being frugal has allowed us many more trips to WDW than I think we would have been able to take if we stay onsite and go all out.
I reason that when our girls are older we may stay on-site but, at this point, they're just happy to be there. When we're in Orlando we never spend any time in our hotel room because we're always at the parks so I can't see paying the premium prices the resorts charge (even the All-Stars) for a place to sleep and shower.