I loved Istanbul and would go back again anytime. Loads to see and do and the Turkish people are lovely. Istanbul is very easy to get around either on foot or by public transport. The hotel we stayed in was this place:
www.emzoe.com/
It's not the flashiest of places but it is extremely central in Sultanahment and the people were great (as were the breakfasts). We stayed in the family suite.
As well as the historical sights we also did a boat ride out to the Black Sea, which was interesting. We just got one of the cheap commuter boats.
Would also recommend Marrakech. Again, very easy to get around and people very friendly. Lots to see and do (although not as much as Istanbul).
We stayed at this place in the Medina. We had 2 rooms as they don't do family rooms - Dune and Petit Prince. Dune had the most fantastic deep stone bath I have ever seen.
www.riad-dar-one.com/index2.html
Again, the people there were lovely and breakfast was served at any time you wanted it. We tried to eat on the fantastic roof terrace most mornings. We also ate in the Riad one night and had a fantastic meal.
The Riad is in the old Jewish quarter and about a 10 min walk from the Jaama el fna and other sights.
As well as the sights, we also did a balloon ride with this company which was expensive but really good fun. You don't go as high as you would on a balloon in the UK but it was lovely doing it so early in the morning and with the Atlas mountains in the background.
www.marrakechbyair.com/en/
If I had to pick one over the other, I would plump for Istanbul.