I stayed on the edge of Belltown and Downtown at the Hotel Andra at 2000 4th Avenue. It was recommended by a local friend and was a great location from which to explore the city. It is near the main bus stops, the street car line to Lake Union and the monorail station to the Space Needle. Pike Place Market, and its nearby restaurants, begins four blocks immediately south. The hotel staff was most helpful, particularly in maneuvering the bus system and which ones to take; and Lola restaurant on the first floor, which is a Tom Douglas restaurant, was good for breakfast. The hotel has been totally renovated.
To stay in this area, a good friend recommends Inn at the Market.
For another splurge you might try the Edgewater Hotel at 2411 Alaskan Way at Pier 67 along the water. It is actually built on piers in Elliott Bay. The more traditional Hotel Sorrento is another potential choice along with the Pan Pacific which is a stylish boutique hotel. The Ace Hotel is another great option.
The Alexis Hotel, a Kimpton Hotel, is also known for its it quarterly art exhibitions of local artists curated by the Seattle Art Museum. 1007 First Ave. at Madison.