We have been to Pt. Townsend several times and stayed at different hotels each time, but the Bishop Hotel is my favorite. The rooms are pretty big. We stayed on the 3rd floor and there aren't great views of the ocean from this hotel. If you don't like climbing steps to get to your room, then you probably shouldn't be staying in Pt. Townsend, but ask for a lower room if you don't want to lug your suitcases up 46 steps to the 3rd floor. The rooms were very comfortable and had GREAT digital TV. Lots of channels and nice TV sets.
Rooms were very quiet. I couldn't hear anything from other rooms. The staff was extremely friendly and accommodating. Very, very nice people. The room had everything you could need - fridge, coffee maker, plates, glasses. I really enjoyed this place. It's in a great location as well - very close to the middle of downtown and all restaurants/bars. The parking situation is great since they have their own lot. No hassles at all parking on the street.
If you are planning a stay in Pt. Townsend you could do a lot worse than the Bishop Hotel. It's not on Water St. so you don't have to deal with any traffic/noise, but you are very close to all of the action. Much better than other hotels I have stayed at in Pt. Townsend.
Also - the hotel has continental breakfast included...delivered to your room, which is very nice. They also have fresh coffee in the lobby/hallway outside your room every morning which is really nice since you don't even have to walk downstairs to get it. You can also buy soda and stuff in the lobby whenever you want, or get DVDs to watch.
Can't say enough about the Bishop. If you find yourself in Pt. Townsend I would definitely stay here and avoid staying on Water St. I can't see any reason to stay anywhere else.