Hotel recommendations in Madrid

A friend of mine is going over to Madrid for a few days and needs a hotel/hostel which is nice but won't empty her pockets.
I've never needed a hotel in Spain yet so I have no clue. Could anyone give me some tips for nice places to stay on a budget?
Thanks all.

there are a couple of cheap youth hostels and hotels in Malasaña
http://www.softguides.com/madrid_guide/acc...th_hostels.html

this web page directs you to hotels in Malasaña and Chueca, which is the interesting part of the city to be (lots of bars, cad'e, restaurants)
http://gospain.about.com/od/hotelsinmadrid...sana_chueca.htm