I highly recommend the Best Western Hacienda Hotel. It's right in Old Town and the whole feel of the hotel itself fits right into the Old Town scenery. The rooms are beautiful too and the beds are very comfortable. We were able to get a great rate when we stayed there, although the prices tend to fluctuate depending on the night and probably what events are going on.
If that's too pricey, the Best Western Yacht Harbor was also nice. It was right on the harbor near the Midway and Seaport Village and we had a nice room with a view of the harbor.