What currency is best for Istanbul?

The best currency to use is the Turkish currency, the lira.

The euro is not the currency of Turkey.

As Golden Girl said; however, when I was in Turkey, I found that tour providers were more than happy to accept tips in US dollars or euros. Not sure about small purchases from local markets, but you can always ask. Sometimes they might be happy to receive dollars or euros, but you might or might not get a good exchange rate that way.

Turkish Lira, for sure.

Be careful about items with prices listed in Euros. I have seen instances where the exchange rate was, say, 10 lira to the Euro, and the price of an item was advertised at 5 Euros or 30 lira. I guess they were counting on people not being willing or able to calculate the exchange rates in their heads -- or maybe they just didn't update their pricing as the lira lost value. (One lira is now worth about 0.026 Euros. The value of the lira just keeps dropping.)

Definitely Turkish lira. Use your credit card as much as possible, and try to carry cash.

Is Istanbul Turkey like many Western European cities where ATMs are readily available to take out local currency?

natique2 there are ATMs all over the place in Istanbul and other cities. Some are attached to banks but often there are a block of ATMs from multiple banks. Sometimes you have to try more than one before it works. Given the exchange rate and the fact the biggest bill available is a 200 lira note (approx. 6 USD) you might need to visit ATMs frequently. Pay attention to fees and do not choose DCC if the choice is offered to you.

Best fee rates are ATMs in post offices.

When we were in turkey around touristic spots foreign currency was accepted in lots of places restaurants, guides but in lots of places they don’t accept it . You should use Turkish lira (TL)