I'm down in Key West now and looking through a Promo Book, "SEE KEY WEST". There is a place that lists FREE reservation service for B&B's, Hotels, Condos and Houses. They are called AA Accomommodation Center, Inc.
web address
www.accommodationskeywest.com
Haven't used them but they might be of some help.
Places we've stayed:
Southern Cross Motel: Decent, right on Duval, can be a little loud, no private parking, reasonable at least when we were there
Carribbean House: in Bahama Village 1/2 block from Blue Heaven, nice enough not real big rooms, friendly owners, some parking available or street parking, no meters down there, close enough to walk to places
Key West Hostel: came down by myself last year, did the dorm thing, had a bunk in a room with a few other guys, for $35 it was a place to sleep, mainly college kids and foreign travelers, they also have private motel rooms for reasonable rates, kind of rundown but what the heck, down toward the oceanside beach so quite a walk to Mallory Square and the main Duval Hot Spots