Mantra airport is new and I've found it to be pretty reasonably priced for very decent room, depending on how far ahead you're booking and with which site - and it's right opposite the international terminal (free shuttle to domestic) with trains to city!

City hotels much better for pubs and meals as already said ... I'm only an infrequent visitor to Sydney City itself (usually stay in much less salubrious areas when working!) so I may be shot down here, but I love staying near Darling Harbour (Novotel right there) for a fantastic selection of things to do!