Hi,
SweetAlex!
You know, I can't mention too many more pros or cons (or justifications) to staying onsite other than what's already been mentioned. I can add in my two cents, though.
As
Jamie and others have said, there is really no right or wrong answer. Everyone agrees -- even the onsite fans -- that the hotels are very expensive. So then it comes down to whether or not it is worth it. For some people, the hotel is part of the whole experience, whereas others view it as only a place to shower and sleep and that's it. That's not something that is right or wrong; it's just how people view their trips.
Also, depending on how one tours the parks -- some go at breakneck, commando speeds and others stroll about more leisurely -- there may be more room in the schedule to spend at the hotel than in other folks' schedules.
A big reason why I love to stay onsite is because I already live in SoCal (Los Angeles) -- I am roughly 45 minutes from DLR on a non-traffic day. It's fairly close, comparatively speaking. I need to feel that I am "escaping" the city somehow, so I can totally immerse myself in the Disney magic. When I go to DLR and have a "special" trip (like for the holiday season, every year) with a hotel stay, I want to stay onsite because it is part of the Disney Bubble.
To stay at one of the places on Harbor or nearby (which I might do at some point in the future; never say never) would not seem like much of an "escape" to me. I need to feel as if I am staying somewhere that I couldn't access closer to home, in my own neighborhood! Staying at DLR hotels makes it more of a vacation for me, rather than just a 45-minute ride away from home. Does that make sense?
I like to be on Disney soil from the moment I step out of the car to the second I get in the car to go home. I like waking up and going to sleep on Disney property. I love coming back to the hotel for a break, or after a long, tiring day, and being greeted with a friendly "Welcome home," or a warm smile. My views from my last several PPH rooms have been awesome, and I gravitated to the window every time I was in the room. I like hunting for hidden Mickeys in the carpeting, bedding and details around the room and in the hotel property. I love the walk back to the hotel through DTD, especially during the holidays.
Overall -- and I have said this in other threads about this subject in the past -- there is an intangible, indescribable feeling attached to staying onsite...for those who "get it." I am not expecting someone who doesn't want to stay onsite to set foot in one of the onsite hotels and suddenly get swept up in that same feeling. Again, it's really more of a "thing" that people who love staying onsite already know and understand.
When onsite, guests smile at each other as they pass in the hallways or lobbies. People actually talk to each other in the elevators (which doesn't happen in my neighborhood). Cast Members -- from Valet to Bell to Mousekeeping to the ones manning the front desk -- are delightful and helpful, and will usually go above and beyond the call of duty to accommodate guests. Mostly everyone is in a good mood. It's as if everyone has been kissed by that special Disney magic and is caught up in it...which is fine by me, as there are enough grumpy and miserable people to deal with in "real life."
And I guess that really sums it up. Staying onsite -- for me -- feels like I am getting away from real life. It completes and enhances the whole DLR experience for me.
With the balcony included you will see the rooms aren't as cramped as you would have previously thought. 
I think someone gave you some bad info.
. This coming from someone who just moved from a big city to a little itty bitty town of 9,000 in the mountains (surrounded by everything BUT people and buildings). 
