My wife and I stayed at the Hostal Acapulco in May, and had a great experience. The room was lovely, the people super-friendly (especially Marco), and the location great. We would definitely go back there.

I agree that the construction made the Plaza less than ideal...but that can happen in almost any spot in Madrid...they are always working on stuff.
We tend to rise early, so the noise didn't bother us...and the double-pane glass kept most of the noise out.