I stayed with my family at Hilton Key West Resort and Marina in August of '04 and had a great experience. One word of caution though-avoid the poolside first floor rooms: they are more like a holiday inn than a Hilton. Request a room in the lobby building and you'll probably have a better experience; the other (pool) building isn't quite as nice. Overall, it was a great location, but the restaurant wasn't too good. Plenty of great places to walk too though, and overall the city was quite family-friendly when we were there. Good luck, and have fun wherever you go!