I agree with Cheryl on that! The Grand Californian was very nice though as well, more "luxurious" if you will (especially in the price!
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Although the differences between staying "on-site" and "off-site" aren't too much. Most of the "off-site" hotels (Good Neighbor Hotels) are right across the street and within a short walking distance. Some even closer to the parks than the hotels on Disneyland property!
That said, next time we go back (summer 2008), as long as we can swing it (summer rates at the on-site hotels will be a bit higher) we plan on staying at the Disneyland Hotel!