Key West beaches are generally lousy. If you are in Key West for a few days, spend one of them driving maybe a half hour back toward the mainland (just try driving in the other direction LOL) and go to Bahia Honda beach, my favorite in the whole world. Unspoiled and a very special place. Be sure to get there early enough because parking is somewhat limited. Anyway, a place where I've never stayed but admired was the Banyan Inn. It's near Truman Annex, not on the water, but just a beautiful looking place. I've also heard fine things about the Coconut Beach. For something less expensive but kind of unusual, there is the Angelina Guest House, which used to be the town's whorehouse. It's a trip.
Another place we liked (though it's gotten awfully pricey) is the Eden House, which is a hotel. Nice facilities. Tough parking situation. I think Frodo has the right idea. If you'd like to stay in a b and b, go online to places that have access to many of them and see what they offer. Plenty of them available for your price range, and many are really, really nice.
If you like Cuban food, there's a touristy and expensive place at Mallory Square. We much prefer El Siboney, which is in a neighborhood and not fancy, but the food is wonderful. If you have any specific questions, I can try to answer. We've been to KW maybe 8 or 9 times and got married there. Not experts, but we know the town at least a little.