Great, small, and cheap family owned hotel in the center of where you want to be.
As in the rest of the old town: the walls are paper thin - with no isolation, but a think blanket makes up for it. Street noises are a different and more depressing story thought. The place it self is really cozy, staff are helpful and english speaking, and you'll find everything you need and more of the bath articles. They change your towels, wash your close (free of charge) and take out the trash, but they will not make your bad!
You get a really good value for money here, and your bags will lay safe while you out in the mountains. I would definitely stay here again =)
Watch out for the taxi drivers in Lijiang thought, they will try to charge you 4-5 times the price, the law is on your side, just pay what the taximeter shows!