I used to live in Munich, and I've been to O'fest twice. Well worth it at least once - though i have to say it's a tad overrated IMHO (unless huge crowds are your thing). I agree with Delfste Post about there being better places to enjoy Munich's beer - the Augustiner Garten, for example. The Hofbrauhaus always has a similar, pleasantly rowdy atmosphere to the better 'fest tents. Munich's a great city - the standard of living is sky high.
Book a table if you can (like, way in advance) if you're going as a group. Otherwise you'll be wandering around for ages trying to find somewhere to sit and wasting valuable drinking time. It can be hard to catch the waiter/waitress's eye (lots of competition!) but service is usually pretty slick.
I'd probably avoid the Hauptbanhof (main station) in the evenings. Munich's comically safe (we used to call it 'Toytown') but Oktoberfest is probably the only time you might see British-style drunken punch ups (although it's not usually Brits fighting in this case) - and there's a lot of drunk people around the station after closing. People always underestimate the strength of Munich beer. There'll be loads of (ferociously sober) Polizei too, mind.
I can recommend the Hotel Monaco on Schillerstrasse (which is what passes for a seedy street in Munich). Good prices, spotlessly clean and great staff. Handy for the Wies'n site and Hauptbanhof. Hotel Mirabell on Landwehrstrasse (nearby) is also good. If you find all the hotels booked up, Munich has a superb transport system - so even staying somewhere further out (like Pasing) could be a consideration.