A great place, and I've now stayed here twice. Its just up the hill away from Sairee, past Asia Divers and next to the Muai Thai stadium. Its run by a friendly family who also do laundry at the local standard rate of 40bht/Kg, the only difference is you can see your stuf drying out the back of the hotel.
The rooms are quite large compared to places around the area. You can have a fan or a/c room - I prefer the latter, although sometimes you just dont need it. You get a fridge, DVD player, TV (but no connection as far as I could tell) and a shower that can even give you hot water! All in all, compared to places like Pedangs up the road, its far nicer, and a lot more homely. Certainly if you are spending a great deal of time on the island, this place offers a few more home comforts than others.
Mint Kitchen is right next door and I think run by the same family - also recommended.