Hi,
Although I haven't stayed there,I walked past the Dom Manuel in September and it looked to be a clean,well-maintained hotel with an attractive pool area.The only review I have managed to find is on Tripadvisor :- http://www.tripadvisor.com/ShowUserReviews-g189117-d315095-r5967474-Dom_Manuel_Hotel-Lagos_Algarve.html
The Dom Manuel is situated on the outskirts of Lagos town - about a 10 minute walk downhill into town.The nearest beach - Dona Ana (a perfect,picturesque beach and the one featured in nearly all the Algarve holiday brochures)is approximately a ten minute stroll from the hotel, whilst the Town beach is 10 minutes downhill on the way into town.The Meia Praia,a beautiful 5km beach, is a further 10-15 minute walk away via a one minute ferry ride across the river.
In September,most of the building work seemed to be concentrated on the opposite side of town to the Dom Manuel and,although there was some building work in progress just opposite your hotel in September,this was scheduled to be completed by the end of last September.
Lagos is on the Algarve railway network,so you can access some of the more Easterly resorts by way of the train, but the railway runs inland of many of the resorts although the stations still bear the resort's name,so a hire car would be an asset;this would also give you access to that part of the Algarve which lies to the West of Lagos and which has some breathtaking coastal scenery.
Just ask if you need any further info.

Being based in LAGOS plus a car also gives you the chance to visit LISBON (LISBOA) which is up the motorway, (some of this is toll). A must-see if possible. There is loads to see there and plenty of very reasonable restaurants especially in the Rossio area. Also some great shopping malls. In addition note that the railway here runs down the middle of the dual carriageway which is alongside the river Tagus. Can be fun when trying to do a "U" turn.