Guess it depends on what you want, if you're looking for the spring-breaky type than downtown is the way to go. Personally, I love exploring and more local type hotels when in the mex. My favorite in cabo is actually the farthest one up the coast, in san jose del cabo (the better cabo if you ask me), the Hotel Intercontinental. It's one of the all-inclusive deals, so eating is fine and it has five restaurants plus a few bars and the usual pool etc...it's pretty, open air construction and offers walking to the town which also has a boatload of good places to eat and drink. Private beach is really nice. Favorite bar is one on a rooftop called Shooters about 1/4 mile from the hotel and situated above a decent restaurant. For whatever reason they love showing hockey games on the tv's. Can't remember the rate, but about 180 rings a bell. I've stayed there twice for around 5 days each and I stayed at a condo down the road for a week with my wife after that. Great place, rent a jeep and drive up the coast , great bar called "Art & Beer" in the middle of nowhere on the water about a half-hour out of town.
Nice thing is, if you get the wanna-be-surrounded-by-college-students thing, the hotel offers a shuttle to the main downtown area for $10 round trip, ride is about 20 minutes and you can spend the whole night out there with a ride home assured.
Can't recommend that place enough though, one of the few locations I've gone back to with my own money.