Where to stay close to Lugano? Seems to be quite a few hotels but not a lot of good reports vs. price.

Milan is pretty close, as I remember (I stayed in Lugano for 3 weeks about 15 years ago with family). I recommended a visit to Lugano to friends when they were staying in Milan a few months back, and they spent a day there. That said, I'd personally prefer to stay in Switzerland, but that is one option.

You might want to check for bed and breakfasts in the area as well.

What is your price range that you can't find anything decent? The Albergo Pestalozzi in downtown Lugano is quite nice for a budget hotel. Some rooms have beautiful views of the lake and the staff are very helpful and pleasant. Rooms are comfortable, airy and, as one would expect in Switzerland, spotlessly clean.
The Delfino Hotel is also very welcoming, and they often run good specials that are far lower than their rack rates.
Near to Lugano are two picturesque villages, Morcote and Gandria. Farther along the lake is Caslano, a nice quiet town with some good hotels at modest prices (some with private beaches). We stayed for several days at the Parco Lago in Caslano, very relaxing and not at all expensive. Rooms there come with well equipped kitchenettes and large balconies overlooking the lake. The Ponte Tresa-Lugano tram stops in Caslano.

We stayed at the Hotel Federale in Lugano, and it is one of our all-time favorite hotel experiences ever (although we did, admittedly, splurge on a room with a view and a balcony--close to $200 if I remember correctly. Less "special" rooms were closer to $100.) Anyway, great location (near the train station and Cathedral) and lovely breakfast and breakfast room. If you're wanting to see Lugano, you should stay in, not near, Lugano in my opinion. I second BTilke recommendation of Morcote as an excursion. I would also recommend the funicular to the top of Mount San Salvatore and a hike down to Morcote, if you are in shape for it. Then take the bus or boat back to Lugano.

We really enjoyed staying at this resort which has incredible views of Lake Lugano and wondeful service. Prices starts at $136, though rooms with views will be at least double that amount. If I remember correctly they have two restaurants inside the resort, but a car is needed to enjoy the greater Lugano area.

http://travel.yahoo.com/p-hotel-3416...NsawN0aXRsZQ--

I was looking at the Splendide Royal or the Villa Castagnola au Lau. Anyone have any experience there?

There is an apartment hotel called Centro Cadro Panoramica with good reviews. I had only mentioned Milan as you can also get good hotel prices there (though looking online, it looks like there are numerous hotels in Lugano with reasonable rates). We stayed with family, so we didn't have to deal with that.

We stayed at Hotel Lugano Dante and it was incredible. Location, room, staff and the most amazing breakfast ever. You could stand a spoon up in the hot chocolate! http://www.hotel-luganodante.com/