I make my yearly pilgrimage to KW every November for the Offshore power boat world championships. Been going there every year since the mid 80's. Plus try to make another trip down during the year.
Hard to recommend a hotel for you. Hotels vary from one end of the spectrum to the other. Depending what you are looking for. High end, you have the La Concha, Casa marina, Hyatt. All great places. If you are just looking for a nice place to crash between partying, you have the Blue Marlin on the southern end on Simonton Street. Also a few really nice B&B type places.
Duval is the main tourist drag. Sadly I've seen it go from a really cool laid back party place to an over priced commercialized tourist trap. But, still great bars there. I usually hang at the Greene Parrot, the Schooner wharf, and Conch Republic Seafood company. They are all away from Duval.
Oh, yeah a lot of the hot babes on the 800 block of Duval, aren't babes....
As far as food. Conch Republic Seafood Co. is awesome. Montes, A&B Lobster house. Best conch fritters are from the stand in front of the aquarium by Mallory Square. Definitely hit up the Hogfish grill on Stock island. For a more "classy" meal, Louie's Backyard is the place.
I could go on forever with suggestions with things to do...