If it's not a financial hardship to stay at the DLH, stay there. I would do it in a heartbeat. It's a beautiful hotel, and you're immersed in Disney. Over a 20 year period, I've stayed there twice (the l last time was three years ago). The best part of staying there is that you get early morning entry into one of the parks EVERY SINGLE DAY. That, quite simply, rocks. You can get more done in that hour than you can in four hours in the afternoon. If saving several hundred dollars really matters to you and you don't mind staying at a motel-style hotel, stay at one of the VERY closest hotels to the gate. (I wouldn't stay at Paradise Pier, by the way. It's actually a really long walk.)
We stayed at the Desert Inn and Suites last time and we weren't impressed. We are staying at Park Vue Inn next week, which is about a 6-8 minute walk depending on the speed of your family. I've never stayed there, but I'm hoping it's a little nicer than the Desert Inn. FYI, the
Disneyland Hotel is a longer walk than the Park Vue Inn. I have stayed at the DLH and I loved it. It's just too expensive for us this time. I believe the Adventure tower is the closest, but I can't remember.
If you decide to go with a close hotel off site, just look at Google Maps. Park Vue, Desert Inn, and Tropicana are the closest.
Consider this: your entire experience is different if you are less than a ten minute walk from the gate. If you forget something, it's not a big deal to run back. If you feel a little sick from a ride and you need to lay down for 30 minutes, you actually can. If you really want to use your own bathroom, you actually can! At the end of the night, as you shuffle out with the herd, you can hoof it back quickly to your hotel, rather than run for your life, hoping you'll catch the next shuttle. (And then miss it, and wait for another one to show up, grumpy and exhausted.) I will never go back to dealing with a shuttle.
The one thing that I didn't like about staying at DLH is that, when we went, the onsite breakfast places weren't open early enough for EMH people. It's pretty lame, really, since everyone staying at the hotels has EMH, and most people like to eat before they get into the parks. Hopefully, they've rectified that. I just read that the Starbucks in DTD is open really early though. It wasn't open when we were there.