Cuenca is fantastic! The old town is beautiful, and the natural scenery--cliffs on both sides of town--is spectacular. Hopping nightlife, like everywhere in Spain. I don't know about the parador, but I'd much rather stay right in town. We stayed at the Hotel Leonor de Aquitania, in a family suite with a magnificent view of the gorge. It's located right in the old town next to the cathedral. Nice people, good prices, elegant room.
www.hotelleonoradeaquitania.com Another hotel right nearby, which looked great, is Posada de San Jose.
www.arrakis.es/~psanjose. Oh, I'd love to go back to Cuenca!