I stayed at the Hotel Nacional de Cuba for 4 nights in mid-May 2008 and found it to be reasonably good accommodation. It's built in a grand style and must have been impressive in its heyday. I asked for an Ocean View Room when I checked in and was able to get one. Staff at the front desk were polite but firm - seems to be the way of officialdom in Cuba. Helps a lot if you speak Spanish.
My room itself was on the Fifth Floor, with two large single beds, a small desk and chairs, plus lots of closet space (see photos). Bathroom was fine, if a little worn. No problems with the hot water or towels, but if you need a face cloth, remember to bring one. Foreigners are advised NOT to drink the tap water. I could have upgraded to the executive Sixth Floor for $25 more per night, however, I didn't feel like I needed to. All in all it was comfortable - and the elevators, though old, work well.
My only concerns about the room was the air-conditioning, which didn't always function too well. After reading the LP account of this hotel I was also VERY careful with my things, locking everything up when I went out etc. However, I didn't have any problems. The maids can be noisy in the morning, chatting with each other loudly in the hallways early (7 a.m.!).
The hotel itself is very historic and if you go you should take some time to look around the property: the Bar, the Hall of Famous People, the pool etc. Breakfast downstairs at the large buffet was excellent - the most generous I've seen in all my travels (fruit, eggs, bacon, pancakes, rice, beans, cheese, juice, croissants, buns, toast etc.) and well worth it, especially considering the uneven quality of meals outside the hotel and the difficult food situation for the average Cuban (whom one cannot but feel for!). One problem is getting ICE and drinking water in the hotel - best to try outside in the adjacent La Rampa neighborhood. Cubans are very eager for convertible pesos!
The Hotel's tour desk was very helpful in getting a ticket to the Tropicana Night Club and in answering my questions about where to go and what to do. While some ways from Old Havana, the hotel's location along the Malecon is spectacular and only a $5 cab ride from the downtown. A number of interesting sites nearby (the university, Plaza Dignidad, Coppelia Ice Cream) etc.