I stayed at the Windsor Hotel and before you ask me which child I had to auction off to do so, consider, as I did, a mini-break at the beginning or middle of the week. The cost of accommodation is a mere fraction of the what it is towards the weekend if you surf around enough of the internet accommodation sites. My room cost me $170, over the weekend the same room costs upwards of $550 a night (!).
The great thing about Melbourne is that the city is buzzing all the time, so a mid-week break still affords the visitor a great time without the pocket pain.
A cheaper alternative I would thoroughly recommend is 'The Nunnery' in Fitzroy. I used to stay here during my Trotskyist period which was not very proletarian of me. It's a backpackers mecca, civilised, clean and tasteful with, (gasp) leather armchairs and persian carpets on the timber floors. It has now expanded next door with a guesthouse, no doubt catering for former-revolutionaries such as myself with a mortgage and small mouths to feed.
Wherever you go in Melbourne and wherever you stay, I hope this little guide is of some use to you in your travels. Have fun, be safe, send a postcard.