I'd recommend staying in Mitte since that is so near where the action is and is so interesting. Sometimes in the west you feel like you could be in the U.S. with Starbucks everywhere and such.

We stayed at the SAS with the huge cylindrical aquarium in it and it was awesome. I'm not sure that is in your budget, so I would recommend another place we stayed which is the Movenpick which is very cool and quite inexpensive for what you get. It's not far from subway and is easy to get everywhere.