Oh my gosh, DH and I had our previous Summer vacation in Seattle and we stayed at
The Edgewater Hotel and loved it. It's a boutique hotel on a dock, sitting directly over the water, and the windows open up completely (which is hard to find in ANY hotel) and you can fall asleep to the sound of the water lapping at the pier if you have a waterview/front room. It's an absolutely breathtaking hotel and the rooms have a cabin-like (yet classy) decor that makes you feel very warm and cozy. I believe each room comes with a fireplace and you can choose the waterview, waterfront or city view.
It's within walking distance of the Pike Place Public Market, the Aquarium, TONS of restaurants and everything else in between. Right near the hotel is also a depot for those massive boat tours which is really neat.
I bet you can find great deals on Travelocity or other travel sites too.

Regardless, you're going to have a great time because Seattle is GORGEOUS!