I would start by looking at deals, then entering the hotels into Trip Advisor and seeing how they are rated.
We stayed quite out of the way last time (we were close to the overground train station the Termini) but you could still walk everywhere from our hotel - Vatican City was about an hours walk and that was the sight that was furthest away!! Rome also has a fab underground system so if you don't fancy wasting your energy walking to the toursit sites you just jump on that.
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Thanks i have been looking at deals.. ive found one for £746, staying in a hotel near the termini... i have no idea if thats a good price or not...