There are hotels right in the middle of town within walking distance of everything. In the Sheraton class there is the Hilton and the Sofitel. The Marriot is just a short tuk tuk ride from the town center and the Hyatt is in Takiab, the next town south but still a suburb town of Hua Hin. There are many more that are less expensive but convenient to everything.
I think the Sheraton is about half way between Hua Hin and Cha-Am which is a ways out of town.
If I was coming to experience Hua Hin, I would stay downtown but if you are just coming to relax at a nice beach resort hotel outside town, the Sheraton should be ok.