My partner and I have stayed at the Sheraton Rio four different times, 3 times during Xmas to New Years and once during Carnival. Although the favela is behind and above the Sheraton we haven't had any problems. During the day we walk from the Sheraton down to Impanema which is a great 20 minute walk. At night we take cabs but again, never had a problem.

We are staying there again next year during Carnival. Personally, we like the hotel although sometimes not everything goes real smooth there.