We rent a cottage in Lewes every June, but we usually can't resist visiting at least a few other times during the year.
During those 'mini-vacations' we used to stay at the Blue Water House - but they changed ownership a few years ago and it's a lot less fun there now (still a gorgeous place though, probably good if you don't have kids). The Beacon, teeny little motel that it is, has become our lodging of choice for quick trips.
You do have to know that you're getting a motel. No room service, no restaurant, no bellman, not much in the way of amenities. BUT you do get a clean room in a great location at a CHEAP rate, with a small but clean rooftop pool that my kids love to dive in after a long sticky day at the beach. You can walk to town or the public bay beach. You can drive or ride a bike to Cape Henlopen if you want the ocean. In fact, a great bike rental shop is right next to the Beacon.
When in town, there is no better restaurat than Striper Bites. We live 2 hours away and we FREQUENTLY drive to Lewes for the day to eat lunch at Striper Bites (Rockfish Club = Best Sandwich Ever!), browse the Kids Ketch (Best Toy Store Ever), have a cone at Kings Ice Cream (Best...well, you get it), and walk on the beach. Bliss.
If you're looking for luxury, I recommend the Boardwalk Plaza Hotel in Rehoboth. But if you're looking for a cheap clean well-located place to spend a few nights in a quaint and wonderful town - The Beacon is it.
This review is the subjective opinion of a TripAdvisor member and not of TripAdvisor LLC.