The Hotel del Capital Nazari was lovely - beautiful, clean, characteristic, very conveniently located (easy walking distance to both the Albaicin as well as city center) and friendly. The receptionists always greeted us with a smile and went out of their way to answer our questions about transport and places to see (other than the Alhambra).
Our double room cost a total of EUR 82/night off-peak, which we thought was excellent value.
Breakfast would have cost an extra EUR 8 each, but we didn't opt for it.
The hotel is small and cosy, and arguably more suitable if you are travelling on your own or with a platonic friend. It didn't seem like the best hotel for a romantic trip. If this is what you are looking for, ask for a more private room away from the courtyard.

After reading some reviews here I wonder if we stayed at the same hotel.

We travelled to Granada from Seville. Our hotel there was modern and to be honest almost out of character to the area it was located. This hotel lived up to how I expected an old Andalucian (former) palace to be.

Yes, it was quirky. Yes, you have to walk up a very small alley to the hotel enterence but once inside that huge old door, it felt like we had be transported back a good few hundred years.

We loved the old courtyard around which most of the rooms are located on three different levels. The staff were extremely friendly and accommodating and tried hard to help us with our many questions about the area.

We loved our room. It was not large but again, it's style and uniqueness reflected the age of the hotel. It was spotlessly clean, had TV and minibar and the bathroom was a good size with underfloor heating. We had no problems with the bed as some folks have commented on. It was European firm, just what we are used to.

Breakfast was pretty substantial with lots of choices and coffee/tea were on hand all day, into the evening at no extra cost.

Would I go back to the Casa del Capitel Nazari? You bet I would.

Folks have to remember that this place reflects the city itself. Old, charming, unique and as I've already said, quirky. Just the kind of place I prefer against modern monstrosities too often found to be intruding into many of the Moorish cities.

The hotel was a bit of a disappointment.
The SatNav found the hotel with ease but I was told by the receptionist that I had driven into a restricted zone. I was then directed to the nearest car pack which I was told was 5 minutes away although it took about an hour, although the return taxi did only take 10 minutes!
The surrounding area is going through a lot of building work and we had to squeeze passed a building skip to get up the alley way to the hotel. Not a place to arrive at late at night if you are of a nervous disposition I would suggest.
We had booked on their website and I had printed confirmation that we had booked for three nights; however the reception only had the room reserved for two.
The room was dark with only one small window opening onto a small light well. The furnishing and decoration needed refurbishment. The bed was hard beyond believe, it was with doubt the most uncomfortable bed I have ever sleep on (or tried to). The bathroom gave the impression of being a bit grubby although it was difficult to tell in the poorly lit conditions. Cats would be safe in here!
Breakfast was OK but you have to wait at peak times.
The building is quaint and has the potential for being a little gem; alas it does need work to get there.

A taxi can get you within about 30 meters of the Casa del Capitel Nazari, up a small, cobblestone, pedestrian-only street on the edge of the Albacin district. You have to be buzzed in through a heavy wooden door set within a much larger wooden door, where you will find the reception desk adjacent to a central courtyard. Loads of authentic architectural charm right from the start. The small, modestly appointed rooms are arranged somewhat irregularly around the central courtyard and each one, I suspect, has its own unique appeal. The Casa del Capitel Nazari has a somewhat unvarnished character that I found to be fairly representative of Grenada as a whole.