I stayed at this nice hotel for a long weekend a few years ago and was quite impressed. I don't know any other Hotels in Madeira so I cannot compare it but if they are all this good, I'm happy.
I was travelling for work, so I do not know if they gave me a good room for that reason (that usually happens in Portugal), but I got a really large room with a huge (king-size?) bed and a view over the sea. If you look at the picture, my room was on the right-hand side overlooking the small rocks in the sea. There is also a nice swimming pool.
The breakfast buffet was amazing, it was the largest I have ever seen with all kinds of fresh fruit and juices in addition to all the normal things (bread, pastry, etc). there was a large room with about 10-12 tables filled with food.
On the first day, I decided to eat at the Hotel and I obviously wanted to try the famous beef on laurel skewers (espetadas em pau de louro). You can just sit and watch them being prepared on the grill.
It was not very close to Funchal center, but since taxi's are quite cheap anyway it is not a big problem.
Current prices are about 120 Eur/night
Unique Qualities: Great view, amazing breakfast buffet, good restaurant
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Theme: Hotel
Comparison: about average
Prices: US$120-180
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Phone: (+351) 291 709 200
Address: Rua do Gorgulho, 15-17, 9000-107 Funchal, Madeira
Website: http://www.pestana.com/EN/Hoteis/Madeira/Palms/