We came across this lovely inn during our trip through Yunnan last summer. It's located just inside Shuhe Old Town, which is a few minutes by cab from Lijiang center. We really liked the location, as Shuhe is architecturally very similar to Lijiang center (i.e. many canals, willow trees, old-style architecture, etc.), but a bit less zoo-like and commercial. The inn is located just inside one of the town gates, so it was very quiet. It was very easy to get to Lijiang to sightsee, and also nice to come back to an area that was a bit quieter, though no less picturesque.
The inn itself was very nice. I believe it is relatively newly opened, so the room was very new, with new furniture, bed, flat-screen tv, wireless internet, modern amenities, etc. Everything was spotlessly clean (including the modern bathrooms). The rooms surround a lovely, small central courtyard. The scale of the inn was just right - not too big, not too small. The breakfast in the dining room was tasty. And the staff were extremely friendly and helpful with all kinds of arrangements (e.g. show tickets, transportation, etc.).
All in all, we had a great time. Highly recommended.
A few random tips about Lijiang: the historic old town is very lovely and of course worth a visit. We also went to the Impressions Lijiang show at Jade Dragon Snow Mountain, which was very good (although we had to deal with some rain). Foodwise, definitely check out the hash-brown-like fried potatoes with spicy oil, which seem to be a local specialty.