My comments are going to echo a great many of the others already written - my friend and I stayed here in late April, 2008, and were blown away by the sheer warmth and hospitality of Hotel Grotta! We booked directly, and for the price, were expecting clean, basic rooms...
However - first we were welcomed at the pier, welcomed to the hotel with a free drink of the native Naxos Citron liquor, and we ended up with a sea view of the Apollo Arch, plus all the amenities including a spotless bathroom. Toss in an included great spread for breakfast every morning, some loaner laptops to use for free internet in the comfy lobby, and even some board games to wile away the rainy afternoon - we were set!
The one downside is that the jacuzzi was not operational since it was still the end of the low season - but that would have been the icing on the cake :)
Thanks Hotel Grotta!!
Mike and Emily

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