Hi,

We're looking for a nice, friendly hotel in Palermo in a good walking location.

We're very flexible budget-wise and will stay 3 nights.

Thank you for your help.

We, along with all those other people at Tripadvisor, really liked the Ambasciatori. It's well-located on the Via Roma, within walking distance of the train station, where the buses from the airport stop. And not too far from the Quattro Canti, the center of Palermo. Nice rooms, a fabulous view terrace, good breakfast.

We liked this place in the New city.
http://www.principedivillafranca.it/villafranca-en.html

We stayed at the Grand Hotel Wagner, www.grandhotelwagner.it, this past June. Another Fodorite had recommended it, and, while I'm not usually drawn to accommodations with lots of gilt trim, I liked the Wagner's old world feel and its location between the old and new cities. The internet rate was about €125/night for a double.
Other often-recommended hotels in the area near Politeama square are the Plaza Opera and the Garibaldi.

Why not a B&B instead of a hotel? I really liked the Sky Sleeping B&B - click on my name for my Sicily TR with my bad Palermo hotel and good Palermo B&B experiences.

I see from http://www.bed-and-breakfast.palermo.it/eng/ that it's now a guesthouse instead of a B&B - not sure what difference that makes, and the rates are still good.