We are traveling by train and wanted to spend two nights in Bern. Hotels we like are $400 - wanted to stay in the old town. Is there a nearby town that would be nice to stay but still be within a short distance train ride. Or, should we just "bite the bullet" and stay in old town because the time and convenience will be worth it?
Rick's Switzerland book does not recommend a very long list of hotels in Bern, maybe partly due to high prices. I focus on location and price and don't care much about other amenities. Here are two with doubles for about 150 francs: www.bernbackpackers.ch (part hostel, part hotel, earplugs included due to nightclub) and www.marthahaus.ch (quiet neighborhood, two bus stops from the train station or walkable without luggage).
I'd suggest staying in the old town if possible. It's really nice to wander in the evenings, and there are often street entertainers, small fairs or whatever to browse. I stayed at Hotel Continental and was pleased with the room and they serve a nice breakfast. It's an easy walk to the station from the hotel once you know the way.
Try Burgdorf, it is about 20 minutes from Bern by train and has a very nice old town to equal that of Bern in my opinion, it is just not very well known.
Disclosure: I live in the area so I might just be a tad biased ;-)