In reply to Ian Ash:
there's a wide range of quality and cost!
on my first few nights last time, I went to the Shambaling
http://www.shambaling.com/ and for about £15-£20 a night, it puts any fancy hotel in the UK to shame. makes the hilton look like travelodge! quiet and out of the way too.
On the other end of the scale... I stayed in Hotel Florid in Thamel for £3 ish a night and very basic but close to everything.
There was another one which I can't remember atm but will find the card this evening. It was very good and about £7-8 a night.
If you go into thamel without a booking, you can really barter with the commission chasers. they are everywhere. but always look at the room before the handshake!
Kathmandu guest house is very swanky and for british prices its pretty good, but compared with surrounding hotels, as long as you dont need silver service, you can get a lot cheaper.