We have reluctantly just finished our 10 day stay at Rhenia Bungalows and we can't wait to go back! It's in a marvellous, elevated position, overlooking Tourlos Bay, where the new harbour is located. That means you get great views over the bay towards Mykonos Town, without the hassle of being in the centre.
As the last reviewer said, if you do see several big cruise ships in the harbour, town is definitely best avoided as it does get very crowded. In this event, there's a taverna called Matthew's just at the bottom of the hill, which is fine, reasonably priced and very convenient.
Getting to town is easy - there's a regular bus service from the bottom of the drive, you can walk (about 20-25 mins), or hire a scooter or car from the place nextdoor to Matthews. Our scooter cost €10 a day based on a week's stay and was great for getting to all the different beaches around the island. Our favorite was probably Platis Gialos where the €10 cost of 2 sunbeds and umbrella is knocked off your bill at the restaurant behind (other beaches in the south charge €12 just to hire them). The water is very clear for swimming, but the beach is quite narrow, so I imagine it could get a bit crowded in high season. For seclusion (and when the wind isn't too strong), we liked Panormos and Aghios Sostis in the north, both much less developed. For entertainment value of the people-watching kind, it's hard to beat Paradise beach, although for swimming there's a rocky ledge a few metres out to sea which you have to climb over to get to open water (watch out for black sea urchins on that ledge - if you step on one, it will ruin your holiday!). There's also a good self-service cafe there to help keep you on-budget. Dance music is pumped out all day, and things really get going in the early evening, so if you prefer a quieter time best avoid it.
Honestly, the best memory of this holiday will be the generosity and warmth of the management team of the hotel, Andreas, Alexandra and Georgie who can't do enough to make you feel welcome, plus there's Pretty the adorable, sweet-natured black and white spaniel, who quietly greets all the guests. Many people have been going for very many years and that speaks volumes.