hotel baltum. through alpha rooms.
http://www.alpharooms.com/hotel.aspx?establishmentkey=FAC9C6C5-D00D-4632-8B55-F4C8271AA007
cheap! right by old town,next to police station. a/c in room.(no pool tho) no hills or anything to climb.and taxi rank about 50m away. although there are others right in the middle of it.
hotel california is as smack bang in the middle as can be.
http://www.hotelclub.net/hotel.reservations/California_Hotel_Albufeira.htm

and i liked the look of this one may stay there in october up a bit of a hill but its in the heart of the old builldings on the hill in middle of old town
VILA RECIFE
http://www.alpharooms.com/hotel.aspx?establishmentkey=FEFD2AF1-6BAB-49F7-92C0-F38171681771

all links are for descriptions only. i have used alpha rooms for the baltum ok have no idea where the best deal for the california is but i think some tour ops do it if you dont fancy diy.

there are several others around and some really nice pensions
im staying in CASA MITCHELL
just on the edge of the old town in march with a few mates only £11 a night

I'm going back a few years, but have stayed in the Vila Recife twice. The location for the Old Town is excellent.
I can't speak for how it is now, but when I stayed it was clean, had a bar and a swimming pool, and was just a short walk from the centre of the Old Town.

The Sol E Mar overlooks the beach by the tunnel and Turial Park is opposite the above mentioned Hotel Baltum

The Rocamar is another one to consider - like the Sol e Mar, it's in a great location overlooking the beach.

Thanks for this, am thinking of going in sept. Was very unlucky last year, went in April got 6 out 7 days great weather. Went in June rained for 4 or 5 days out of 7. Is the weather in Sept ok?

Also are all of the renovations finished in the Old town now?

Thanks again guys cant wait to go back to the Algarve

September weather is usually brilliant;we've been going in September for the last 19 years and,although we've had the occasional "iffy" day,generally speaking weather is hot and sunny with temps well in the 70's and 80's ( old money, of course. )