Depends on what you are planning on doing. Staying in-city is more expensive, but beats commuting in. If you are planning on doing stuff outside of the city then staying there would be wasteful.
If I stayed downtown, I'd stay around the shopping core or business core (7th-4th, Virginia to University) or Pioneer Square (if looking for nightlife. Yes, Belltown, but Pioneer Square is more interesting). Or 1st ave between Seneca and Columbia.
The breweries are all spread out. Pike, Elysian and Old Stove are a seven minute walk from the Shopping Core (plus Improv and the Gum Alley, the piers and Pike Place Market). If you like Coffee, stop by Fonte and then take the Harbor Steps to the piers. McMenamins and Gordon Biersch are right there in thd core, but they are chains and in other cities anyway. Ghostfish (gluten free) and Seapine are a 10 minute ride by rail to SODO. Lots of others around if renting or hiring a car.
Stuff to do, maybe get the CityPass if the attractions are interesting. The Space Needle is under renovation but still open and the Seattle Center is a cool spot. If the weather is nice you can get cheap Elliott bay tours riding the ferries. Pioneer Square is interesting even if not interested in clubs, and includes the underground tour, which is really fun and not expensive, the Smith Tower, Occidental street which always has something going on, and the birthplace of UPS, which had a hidden waterfall. There is a respectable Chinatown, which hides a playable pinball museum.
Also, come back mid July as when it comes down to it, the Pacific Northwest is way more interesting than Seattle proper.
