I've stayed on-site at both the DL Hotel and PP Hotel and I loved them both! The DLH is very Disney. From the bedspreads with different DL attractions to the Tinkerbell borders, you can totally feel the magic in the rooms and around the resort. PPH doesn't have that same magic feel, but it is still a great hotel. And if you have a resort view room, the views are amazing!
I used to think it was a great idea to stay off-site to save money, but once I stayed on-site I became spoiled. Now I'll never stay off-site again. I prefer to book through AAA as you will save a few hundred dollars vs. booking directly through Disney. That and you get quite a few extra perks that make paying extra for staying on-site soooo worth it! How can you pass up unlimited fastpasses? Seriously.
If you can swing it, stay on-site. You really won't regret it!
