I've lived in Pasadena since 1993 and really like it. Of course, most people know us for the annual Rose Parade.
There aren't enough hotels in Pasadena, but downtown LA and even Monrovia, CA are pretty close and have a decent amount of hotels to choose from.
If you can, take the Gold Line to the Parade. You can avoid worrying about parking.
Unless you are a teenager or crazy, don't spend the night on the street waiting for the parade. There are plenty of spaces further east on the Parade Route. You can walk right up and stand on the front row on Colorado BLVD. And it takes about an hour for the parade to get to East Pasadena, so that gives you more time to sleep in.
After you see the parade, it's really the same every year. Veteran Pasadenan's watch it on Channel 5 - it's repeated all day. They have the best coverage.
Don't go to see the floats after the parade is over. The parking is horrible and the crowds are overflowing. Instead, see above. Watch one of the reruns on Channel 5 New Year's Day.
If you are a runner, a fun thing to do is join the other runners about an hour before the parade starts and run down Colorado Blvd. You burn off calories and can then go watch the parade on Channel 5.
Also, I've been to Macy's Parade, and the Rose Parade is much better. It's warmer, prettier and you can watch football all day afterwards.