Not sure if I would stay in western style hotels at all in Japan. They're bloody expensive generally, and by definition not very Japanese. I'd go for a combination of business hotels which are pretty economical and still quite traditionally Japanese I think and definitely a traditional ryokan / onsen at least once. I took my dad to one ... not sure if he actually enjoyed boiling his *** off and eating raw fish, but it's certainly an experience he'll never forgot (isn't life about experiences?).
Sorry, can't help you with Kyoto or Osaka info.
Just curious, will you be planning with a travel agent or going independently after doing your online research?
Anyway, hope you have a wonderful time.