Where to stay:  

Depending on what you like you will find everything in Naama Bay.
I would recommend to ask at the dive centre (before you book the hotel) if the hotel you want to book is part of their pick-up schedule. In my eyes the area immediately in Naama Bay or a bit north and south of it is preferable. Pick-up service is assured and there are great hotels.
I have stayed in the Hotel Tropicana Rosetta, just opposite the Hilton Fayrouz. The hotel is quite big but calm. The whole hotel including rooms and pool areas is very clean and food is excellent and very tasty. And in addition, the price compared to the other big hotels is below average. Naama Bay downtown and the beach are in reach of 5 to 10 minutes by foot. 

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