I have always stayed offsite, primarily because we wanted to have our young DDs sleep in a separate room. We have stayed in suite hotels, and condos in Orlando. They definitely gave lots of room, and an "escape" from Disney.
However, on our last trip we decided to try
Disneyland. There, I found the magic lacking in Anaheim. The parks were great, but not an escpe from the city. I decided it would have been a better trip if we had stayed at the pricey-onsite hotels.
Now my DDs are a little older, they'll stay up a little later -- and I found we parents are a little older, and will go to bed a little earlier

so sleeping in separate rooms is no longer a necessity (albeit a luxury). So, this year we will be trying the Wilderness Lodge.
Pros for staying offsite:
- larger & cheaper facilities
- easy access to quick/cheaper restaurants
- easy access to cheap stores (ie. Wal-mart) and groceries
- easy access to other non-Disney attractions
- ability to "escape" Disney
Cons for staying offsite:
- definite need for a car
- parking is now $11 a day at the parks
- escaping "Disney"
Pros for staying onsite:
- magical express & transportation -- no need to rent car, and easier access to the parks
- ability to book
Disney Dining Plan
- staying in the magic 24/7
- ability for groups to split up, and return to hotel separately
Cons for staying onsite:
- smaller, more expensive hotel rooms (doubles in rooms unless a deluxe hotel)
- limited to Disney, unless renting a car
- paying for disney dining 24/7
- no non-Disney shopping trips (ie, outlets & wal-mart)
- staying in magic 24/7 (for those who want to escape it)
It all comes down to your group & plans for the trip -- are there small children that need naps, or a reason you need more space? Do you have older children/adults that want to visit Seaworld/Universal? Are there shoppers in the group? Do you have access to a car while down there?
If the answers are no, book Disney. You'll be immersed, and you won't have to worry about transportation/dining/airports etc. If you want to visit outside the park, you would be better to save your dollars and book a condo or the like. I know someone already mentioned Windsor Palms, I have stayed at Cypress Pointe and it was also a great condo with extra activities for the kids, and close by. We paid $85/night for a 3-bedroom condo in 2005.
There really is no right or wrong -- it's all DISNEY

That being said, I'm excited to try out the WL and see what the fuss is all about
