We were struggling with the altitude when we arrived at Hotel Arcangel, and the staff carried our suitcases up to our room for us and brought us complimentary tea with coca leaves to help us overcome the altitude sickness (this despite me taking altitude sickness meds!).
Our room overlooked the tiled roofs of the town, and it was a short walk to the main plaza (and not too much of a climb back up). We were glad we had stayed here rather than in San Blas, which was a much steeper, higher climb up. The pretty street Siete Borreguitos was just at the end of the street, and climbing up it led to a view over the whole town.
The breakfasts were very good, and the room and bed comfortable. We switched hotels to stay there again for a final night after a 2 day trip to Ollantaytambo and Machu Picchu, and they let us keep our suitcases there for free for those nights - and stay in the same room again! Highly recommended.