I would like to be as central as possible, to shops, attractions etc also if there is an arty area this is even better.
BackHome hostel in Kuala Lumpur is excellent for affordability, location, comfort & great atmosphere. I stayed here in October and I would recommend it to anyone!
The only thing I would keep in mind when you're looking for the hotel: the directions on Hostel World's site say "you should be able to recognize BACKHOME by our white-washed walls and red banners...." actually the banners are super faded to look almost brown! But once you find it, it's in an excellent location for exploring the city.
Here's the link; hope it helps! :)
http://www.hostelworld.com/hosteldetails.php/BackHome-Kuala-Lumpur/Kuala-Lumpur/35901 about 8 years ago
Hotel Capitol is very central - not sure of the prices cause it has been a few years since I stayed there.
Last month I stayed at Berjaya Times Square. Not recommended for the price - it is so big it takes ages to get from the front door to your room! about 8 years ago