Ive been there a bit..most recently on footy trip 2006.
Airlie Beach is much better value than HI. I'm all for luxury but I can't stand HI for the pure fact that I'm of the belief that high rise buildings just DONT belong on islands

If you want a bit of luxury I can recommend daydream Island (any pool with a swim up bar is a winner in my book

I thouroughly recommend the toblerone cocktail

)
If you have kids, stay on the mainland because there's nothing worse than bored kids on an island.. even though most have kids clubs.
If you have shitloads of money- go to Hayman but not really that much to do there nowadays, it's too exclusive. South Molle is cheap as chips but only because the place has gone downhill, it's shocking now, since it was taken over about 3 or 4 years ago.
I find best to book accommodation on the mainland, and if you want to spoil yourself with a night or two on an island, book it at one of the many agencies in the main street when you get there as they're last minute deals are awsome - designed for backpackers so good value.
Coral Sea resort in Airlie Beach is nice and overlooks water and is within walking distance to all the pubs etc.. has the balcony/bbq/spa thing..