We stayed at Seagrape Inn in West End last year. Since then they have added a local dive shop and another modern cement block building, but still have the charming little cabins overlooking the sea.
http://seagraperoatan.com For a place to relax and be away from the crowds it is hard to beat.
We loved it. Stayed in the cabin for half the trip and moved to one of the new buildings for the remainder of the time. Both were very nice, clean, and included a small refrigerator for keeping snacks. The new buildings are much cooler in very hot weather if AC is a big deal for you as it was for my wife.
They also have budget rooms for about $10 per person but are not AC. It is about a five minute walk to restaurants, 10 minutes to main part of West End. I dove with Native Son Divers and they were fabulous, but most of the dive shops there are really good.
We are going back in April and are debating as to whether to stay again at Seagrape or to go to Bananarama or Las Rocas on West Bay just for a little variety. (The beach at West Bay is unbelievable!!!) Hope you have a great time.