I always stay onsite. All of my DLR trips since probably 1987 have involved staying onsite. I have stayed at all 3 DLR hotels, with the GCH and PPH being the most recent. I like all 3 hotels for different reasons, and I think you really can't go wrong with any of them. That said, as the years pass and the prices go up and up, it is getting increasingly difficult to afford staying onsite. However, I find that for my friends and me, it enhances the whole experience for us. It makes it more vacation-esque for us. We are not so much interested in precisely which hotel is closer and that the off-property hotels are closer than the PPH is. And paying the extra money to stay onsite is worth it for me/us, but it is not for everyone. I like to be immersed in full Disney mode from beginning to end, from the second I get out of the car to the second I load my bags back in the car. I like to get my Disney folder with my brochures and room info at the check-in desk. I like that sometimes the CM at the desk will throw in a pin or an 8x10 B&W photo just for fun. I like to get my room key (Key to the Magic) with my name printed on it. I like to see the Mickey 'ears' bath products in the bathroom when we enter the room. I like to look for Hidden Mickeys in the wallpaper and carpets and shower curtains. I like to turn on the TV and see that it is on a Disney-related channel. I like to see Disney statues and artwork wherever I walk on the property. I also like the perks of staying onsite - the Magic Morning feature comes in very handy; the ability to send purchases made in the parks back to the hotel for free is very handy; and the use of the GCH entrance into DCA (available to any guest of any of the 3 DLR hotels) comes in handy in the morning, before DCA opens, to get in the line right by GRR and high-tail it over to TSMM to beat the masses of people heading in the same direction.
I just like it. I like that everywhere I look on property has some touch of Disney, whether it be in the beach/surf/nautical theme of the PPH, or the rustic elegance of the GCH (look for the Hidden Mickey in the grandfather clock) or the lush, slightly tropical-influenced, highly 'Disney-fied' grounds of the DLH. I want the FULL Disney experience when I go. I live in SoCal, in L.A., so if I am going to a place that is only 45 minutes away from where I live, I want to truly escape and not remember that Harbor Blvd. is right outside the gates. I can see traffic and IHOPs and McDonalds, etc. in my OWN neighborhood. If I am at DLR, I want to see ONLY Disney property the entire time I am there, from beginning to end. Total immersion.