@MP The Sheraton is where we usually end up, as the location is excellent for families. You're steps away from the gondola and hiking trails, there's a small stream directly behind the hotel where kids can play or you can pull up a chair and relax, there's a mountain coaster and mini-golf course and several restaurants within easy walking distance. While there's plenty to do, it never feels overcrowded or overly commercial, in my opinion, as you always have that beautiful mountain backdrop. Beyond that, there are your Fairfields, Hamptons, etc., and I'm sure all are fine properties, but the location can't match the Sheraton. Finally, Rabbit Ears Motel is a very basic option in a good downtown location (Sheraton is up in the Ski Village area) but it was clean the last time I was there, which has now been several years. There are some B&B options as well but I have no personal experience with them.
As for restaurants, make sure to have breakfast at Winona's downtown. Their cinnamon rolls are fantastic (and huge!) and I've never had a bad meal there. Be sure to get there early, or be prepared to wait. It's always very busy. There are any number of good lunch or dinner spots, depending on what you're in the mood for.
Enjoy Steamboat! It truly is an absolute gem!