Sheraton is too far away from the action and the Palace is a long and dangerous walk to the restaruants.

The best bet is to get one nights accomodation and head down to the Rio Orthon Place and just past that you'll see a lot of outside tables. go to the first one just past the hotel and you'll find that it's mostly USA expats that spend most of their winters in Rio.

They will give you the names of Hotels in the area and even take you to them. You can save over 50% on hotels.

As far as the action goes these people are the stars, most of them speak Porteguese and are more than willing in most cases to help out. It gives them something to do and who knows you maybe able to help them with something to.
REgards,
Robert