My girlfriend and I found Southwinds the last time we came down in late January and decided to try for Memorial Day. Even for the holiday weekend, it was reasonably priced compared to the other hotels and motels on the island and the location to Duval Street is hard to beat. It is a bit of a walk to the opposite end of Duval with the bars and nightlife but it's worth the savings. If you're only using the room as a place to sleep and not spend the entire trip then I definitely recommend Southwinds.

We were worried about finding a cheap motel in key west particularly as its a memorial day but came across this little gem at 89 dollars per night. Sure, it's old and basic, but it's at the heart of key west near too duval street and Bob the receptionist was lovely and helpfully.
Pool was great and was very warm.
If, like us, you,re not too fussy and just use a motel as a base, then this is cheap and ideal.
Only real downside is the A/C unit is loud.

We pre-booked Southwinds because of the difficulty in finding rooms in Key West at the last minute, even out of high season; and we were influenced by price in this expensive town. So we were not surprised to find that the motel presented a well-used appearance: bits of our room verged on the dilapidated. However, everything was clean and working: the lady at reception was chatty and helpful; and the sink & storage unit (which we scarcely used) had obviously been recently installed in our room. (We got this room as an up-grade, because our intended room had been taken for an extra night by the previous occupant.)
The location has many advantages, although it is a fair walk to the "business end" of Duval St. and Mallory Square.
All in all, we were happy.

Do not stay here...we paid inflated holiday prices only be be attacked by bed bugs and experience the most horrible night of our lives! Our room looked clean and simple and the motel nicely located, little did we know what lurked behind- it literally ruined our trip! Worse yet, the front desk manager (who looked and acted like a drug dealer) didn't want to deal with the situation. Luckily (after some rigamarole) the hotel owner refunded our stay when he saw the evidence...overall this was one of the most disgusting and traumatizing experiences of my life. DO NOT STAY HERE!!