Accomodation right downtown isn't cheap. On the very cheap end there is the Backpacker's hostel on King St. West at Spadina (which is in a great location in the heart of the city), but Toronto really doesn't have any mid-range hotels right downtown that I'm aware of. All big name hotels are represented here - the Sheraton, Delta Chelsea, Hyatt, etc...and all are nice and conveniently located if you ask for the downtown locations (some chains have 3 or 4 hotels in Toronto). If you are going all out, Toronto's Royal York Hotel is our oldest and most glamourous hotel. Its very well situated at Front Street in between Bay and University. And The Four Seasons in ultra expensive and ultra posh Yorkdale (about 40 minutes walk north of the Eaton's centre just north of Bloor St between Univeristy and Yonge St) is where all of Hollywood's most famous celebrities stay when they are in town.
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