In our minds, it comes down to 2 questions:
1) Will you be getting up early enough to take advantage of early entry?
2) What can you afford?
If your answer to one is yes (and that is certainly our recommendation), stay onsite. Early entry is worth the extra you pay to stay on site as well as possible access to E-Ride nights. The disney hotels are very expensive and very nice hotels for much less are available in Kissimmee, which is closer than some of the Disney hotels to some of the parks.
If you stay onsite, in our minds, there are only two ways to go. If you can afford it, stay at one of the MK monorail hotels, since they make transportation very convenient with the Poly the best. Otherwise stay at one of the All Stars, which is much less expensive, but gets you the early entry.
We go to Disney to be able to experience their very unique attractions at the parks and we like to maximize our ability and money in doing so.
Finally, we always rent a car as it makes Orlando very convenient and Orlando is probably the cheapest rental car market in the country. With effort and some planning, you can get a great deal and offsetting taxi fare puts a big dent in its incremental cost.