Old town is still great, can't tell you about hotels here, because, well, I live here.
Traffic is always bad, but for Pete's sake don't drive between 7-9 am or 4-7 pm here or you will swallow your tongue!
As far as locations, if you have the money, the Hotel Del Coronado is THE place, Coronado Island is breathtaking, DW and I are thinking about buying a 700 sq foot beach house there (about 600k, if anyone wonders - and that's walk to the beach, not on it). Gas Lamp district, near the new ball park is great. If you have a chance to catch a Padre game, it's really a great place to watch baseball (I love live games there). The Zoo is awesome, San Diego wild animal park is amazing, look into becoming members, as it gets you into both all year, but might be cheap enough to be worth it if you just visit both once.
Carlsbad village is neat, we go there a lot since we are just outside of it. But most coastal communities down here have become snotty rich havens, every open space bought and turned into 2 million dollar townhouses piled on top of each other, not much for the tourist to see. Again, Coronado has the best beach, right outside the Hotel Del mentioned above.
My personal feeling is San Diego is a top ten in the U.S. city. Beutiful weather, awesome beaches, tons to do, nearly 50% politically, (slight lean Republican), feels very safe, even downtown, and it's not nearly as fake as L.A.
Can you tell I love this place?