We spent a few nights at the Parador during our visit to the Alhambra. In short, I cannot imagine staying anywhere else in Granada.
Our first room was on the first floor with a view out onto a very stagnant water pond and bars on the windows. The decor looked a bit worn, and I believe I found the least comfortable armchair in the Western hemisphere in that room.
We were visiting the Parador as part of a trip of a lifetime with my Mom, and I went to the front desk nearly in tears, asking if there were another room that we could transfer to. They were full that night, but the desk manager assured me he'd try his best to move us the next day. Throughout our stay, he and the other front desk staff were incredibly warm, polite, and friendly.
The next morning, he was as good as his word, and we were moved up to a second floor room with a gorgeous view of the Alhambra. The decor was noticeably fresher, and it seemed even the ventilation was even better in this room.
We had breakfast included in our rate, and this was definitely worth it. The buffet has a very tasty selection of traditional Spanish foods. The service at breakfast was quite good, but the service for other meals was laughably bad. As other people have noted, you can wait for a long time before anyone asks you for your order. I'm pretty sure the only reason someone materialized when we arrived for lunch was because I was poking around behind the bar trying to find some water after waiting for over half an hour.
So, between the 3 star room at the beginning of our stay and the 5+ star room at the end of our stay, I'd say that the Parador evens out at a very nice 4 stars.