Of the 3 Disney-owned hotels, Paradise Pier is the least expensive, but I would pretty much equate the rates there to that of a Moderate resort at WDW (if not just a bit more expensive).
The only "value" type hotel ($90-100ish - maybe cheaper/night in the off-season) you will find in the area is off-site . . . and some of those can be pretty . . . icky.
As far as advantages, as much as I hate to say it, I don't think there are any more advantages to staying in a Disney-owned resort than there are to some of the off-site hotels.
: In fact, when staying at some of the off-site hotels, you may have a bit closer access to the parks than if you were staying at the Disneyland Hotel or Paradise Pier.
Probably the best "perk" of staying at a Disney resort is that on select mornings, you can enter Disneyland park early (much like EMH at WDW).
Also, as far as the dining plan is concerned, I have never taken advantage of that myself, but have heard from a few that have that it is really not worth it.
Once you have a good idea of how much you'd like to spend on a hotel room per night, go onto the Disneyland website and check out the October 2007 rates for the Disney resorts and the Good Neighbor Hotels. Pick out a few that sound or look good to you, then check around this forum for reviews too.
We've stayed at the Park Vue Inn a few times (but I didn't really care for it) and the Disneyland Hotel (which I LOVED.). My parents ALWAYS stay at the Carousel Inn and Suites and say they won't stay anywhere else unless the Carousel is booked solid.
I have also heard good things about the Desert Inn as well at the Candy Cane Inn.
Hope this helps!
ETA: 18 years ago, there was only ONE on-site resort hotel . . . the Disneyland Hotel!
It's been there since 1955!