Patzcuaro or Morelia Hotel recommendations please

The city of Oaxaca and the surrounding villages are great places to visit. There's much in the way of arts and crafts to see (and buy). We stay at Casa Colonial, a charming and secure B&B within easy walking distance to the Zocalo. Jane Robison, the owner, has lived there many years and can arrange for trips in the area. She offers a Day of the Dead tour which, I'm told, is really great.