Advantages: Mazda Factory tour, Centrally located Baseball stadium and sights & incredible Miyajima daytrip. Disadvantages: Expensive of accomodation!
...of transport in the city and you will probably want to near that. Anything near the station would be well placed, or in the centre of town. Plucking a name from my Lonely Planet, the Hotel Kokusai looks very well positioned indeed. When my parents came they stayed next to the railway station in the New Hiroden and this was reasonably priced, though certainly not budjet, and also well positioned. The Hiroshima Youth Hostel, as the Lonely Planet points out, is in a rather inconvient location, about 2km north of town. If you could stretch to about 4000 Yen you could get a better hotel nearer the centre of town and probably have a much better time - certainly you'd see more.
For food start at the A-Bomb dome or baseball stadium and head east along the main road and tram line. Any of the streets off to the side of this for the first 400m...
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