My wife just spent a week in Istanbul and had a great time. I met her there while on a layover for less than 24 hours. I can't wait to get back. It's truly a lovely, active (and all the other things that dlish said above) city.
My mom just spent two weeks on a package tour, she arrived just as I was about to leave. She spoke highly of the southern cities along the Mediterranean. While I wouldn't advise getting a tour guide and driver, if that's your sort of thing, by all means go for it. I am told that it isn't too difficult to travel around by yourself. Regardless, I don't think you really need a guide in Istanbul. The transit is cheap and easy and with a little planning, you can see tonnes.
My wife and her friends rented this apartment while they were there:
http://istanbulplace.com/apartments/firuz-place/. It's in a very cool part of town. If you can avoid staying in the touristy hotels just below the Blue Mosque, you should. Sure, it's a place to stay but there was just something cool about staying in a neighbourhood with people who actually live in the city.