I'm glad I decided to stay in Brugges. Although it is "touristy," it is possible to get out of the crowds and see some small town sights.
We stayed at the Hotel Marcel and I would recommend it unequivocally. One of the owners has that Belgian snippiness that RS mentions, but it's surface--she's nice underneath, and the other owner is as sweet as Belgian chocolate. The rooms were spotless--the whole hotel was spotless. The beds were big and comfy, with linen sheets (yes, real linen). The bathrooms were weirdly modern and sort of integrated with the room, but had the biggest showers in Europe and, again, spotless. No view to speak of, but the hotel is located just seconds from the Markt and yet on a totally silent side street. Breakfast was delicious (make-your-own waffles beat the street versions hands down). And a nice addition: they run a (again "spotless") laundromat right next door; it's a bit pricey but soooo convenient.
We had a really hard time finding good places to eat. Many of RS's recommendations include the word "touristy," and they are. I wish he'd find more unknown gems, but then they wouldn't stay unknown for long, would they? I got really tired of fries with everything. The BBQ at De Hobbit was good--dry rub rather than juicy--but who goes to Belgium for BBQ? Avoid everything on the Markt and don't go to the Golden Monkey unless your life depends on it. In fact, the best meal we had was recommended by our hotel: Brasserie Souffleur on Vlamingsrat. And there's a little Belgian chain of organic restaurants called Le Pain Quotidien; their Brugges site at Simon Stevinplein 15 is quirky (a long row of small shops tied together). Their wait staff are probably all students but they are friendly...and the food is excellent and reasonably priced.
And of course, eat chocolate. We loved the crazy Chocolate Line.