Hotel: I always stay at the Royal Orchid Sheraton (ROS). It's conveniently located right on the Chao Praya river, Bangkok's major waterway. There's a ferry stop right next store, a small but good outdoor food market (morning and evening) only a half block away. In the past, it's been about $120 US/night, but I'm not sure how it is now with the weak dollar.
In addition to all of the usual must-see's in BKK, these are some of my favorites that are a little less on the beaten path:
Must Do: If at all possible, arrange to be in BKK on a weekend. Go to the Weekend Market. Trust me. Also known as Chatachuk. You can even take the elevated train from near the ROS right to the market. You can also take a cab.
Massage: Go to Wat Po (a temple) and be sure to go to the massage school on the temple grounds and get a Thai massage. You'll be fully clad and lying on a communal platform with others. The ceiling is painted yellow and there are lots of ceiling fans. It's an amazing Thai experience. Better still, it costs about 300 Baht, which used to be about $8 US.
Jim Thompson's House: It sounds like a tourist trap but it is absolutely not. One of the most beautiful and peaceful places in BKK. You'll want to stay for a while.