You want to stay in a nice place and splurge, or do you want to go a lot cheaper and spend the money on good food?
The Galvez is the nicest place down there, probably, but there are other very nice hotels. There's a Holiday Inn that faces on the Gulf.
The best seafood place is still closed from the hurricane, I believe.
Edit: This is a radical idea, but you can go on a cruise out of Galveston on the Carnival ship (4 or 5 days) for as little as $199 each (plus some port charges, etc.)