Zion Hotel is a favorite of mine. It is directly on the Midhrahov in Jerusalem - an open air pedestrian mall. The hotel itself is located on the upper floors of a very old stone building, with no elevator. You''d be advised to pack light! Rooms are spartan, but clean. Breakfast is included in the rates. The hotel has tubs, which is a rarity in this level of accomodation in Jerusalem. Rooms also have cable TV. There is a 24 hour restaurant on the ground floor. The hotel has a bar, but it was closed when we last visited.
Transportation to and from the Zion is a breeze. The bus line runs right down King George and Jaffa streets, both of which are within an easy 5 minute walk. The main bus station is about 10 minutes on foot. The Old City is about 15 minutes away - walking downhill. If you have a car, you can park it in the public parking lots near Yael Solomon. It was about 10NIS for overnight parking when we were there. Cabs are also easy to pick up in this area of town.
The only caveat is that the street noise can be quite loud, especially in Winter when you won''t be using your A/C. Zion Hotel is perfect for those wanting to experience the fun of dining and dancing in the area and not have to worry about a cab or a drive to hotels further out.