I think it will be tough to make it to Taipei 101 obseratory with your arrival/departure times.
The Sheraton is near completion of the major renovation. All interior work have been completed and they have done a fantastic job. I stayed there three times the last few months. There is an MRT station (Jin-An Temple Station) 2 minutes walk out the front door of the hotel. The 101 tower is near City Hall. Take the MRT to the City Hall station and it is about 10 minutes walk from there. The area is one of the most popular gathering spot for the locals with many department stores, movie compex (Warner Bros. Village) and Restaurants.
More info on Taipei 101:
http://www.tfc101.com.tw/english/index.htm