Tijcal probably wins the prize for being the closest, but Cruz Sol (which I believe has been well-reviewed previously on these boards) and Perla Austriana are also pretty darn close, being built into the Plaza Santa Cruz which abuts the Plaza Mayor. The Hospedaje Madrid is a few steps further, but still a stone's throw from the Plaza Mayor.
I have sung the praises of the Hotel Plaza Mayor on this bulletin board many times before--it certainly doesn't border as closely as Tijcal, Cruz Sol, and Perla Austriana--but it is a lovely, clean, well-appointed place to stay and is only a few steps from the Plaza Mayor.