This is not a question we can really answer for you. It depends upon your personal tolerance for hot weather. Certainly it appears that you enjoy warm weather as you are considering Cyprus or Crete, which are other hot weather locations in August.
I personally find August too warm in almost every place with the exception of the Pacific Northwest in the US. My husband, on the other hand, would love Istanbul in August. He is most happy when the temperature hovers in the high 90's. So regardless of where I am in August I am most likely to spend most of my time inside with the A/C turned on.
If I could not visit Istanbul in a less warm month, I would certainly be willing to visit in August. Any hotel you would consider would have good A/C, so you would be able to sleep at night. I avoid August more for the crush of tourists than the heat, but as Enigma points out, Istanbul residents leave the city in August so, while Sultanahmet may be very busy with tourists, other areas of the city are less crowded.
I wouldn't visit Istanbul during August due to the heat. Also, finding a hotel with a pool is a challenge as they are very few and expensive.
One year, I travelled to Turkey in early June and found it very warm during the day and warm at night. For me, that meant showering twice per day due of the heat and getting clothes laundered repeatedly.
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