The Covent Garden Hotel is centrally located, close to the theatres, and offer excellent service. We had a wonderful stay in London there. I found them via Tablet Hotels, a website for boutique hotels around the world.

Here is a link:
www.tablethotels.com/Covent-Garden-Hotel/London-Hotels-England/300

The Covent Garden Hotel is part of a fabulous hotel group - Firmdale Hotels:

http://www.firmdale.com/

One of my Happy Places is the Soho Hotel (also part of that group). It is gorgeous, and is quietly tucked away, down a small quiet street in the middle of the Soho bustle.

The Draycott off of Sloane Square. Great small hotel if you are looking for a traditional british hotel. Great service, great, personal rooms that are all unique (some with fireplaces), and gret location.

we loved the lanesborough. walking distance to harrods and buckingham palace. across the street from hyde park.(or was is green park?) butler service for each floor. a lovely room for breakfast and tea and a cozy library with sofas for after dinner drinks etc....

We stayed a few day at The Rockwell, a member of the "design hotels", in June. We had an incedibely large room for London on the Lower Ground floor with a small terrace with two chairs and a table. It's probabely the cheappest Boutique hotel in London.(http://www.therockwellhotel.com/index.stm)

I recommend 22 Jermyn St. Owned by Henry Togna (who happens to be a friend of mine). It's a small but high-class establishment perfectly positioned below Piccadilly and between theatreland and the shops http://www.22jermyn.com/

Stop Press: sadly now closed owing to the 99 year lease having expired

The Sumner Hotel opened in 2006 its very nice, only 20 room and Queen and King size bed around 150 pounds. But if you can afford it I stayed at St. Martin's Lane, it was like 'wow', very very groovy, with had two children and they were treated like royalty.

My favorites are:
Blakes for intimacy - this is the original boutique hotel and still amazing.
The Gore great central location and a good bar
The Zetter a great restaurant - great position if you want to be closer to the east of the city

Agree, The Zetter is a great hotel, Malmaison are offering some great prices although not central London, and of course there's Gordon Ramsay's new York and Albany.

A long time ago, we stayed in a charming boutique hotel in London called "47 Park Street." At the time, it was a Westin Demeure property. Does anybody know if it is still in existence and if so whether it's still as nice as it was back then?