With a couple of friends of mine, we are travelling to Ios the last 7 years all the way from Amsterdam. We used to stay anywhere we could find a room. SInce 2005. Then accidentally we've been sent to villa mata due to some kind of mistake with the bookings, an other hotel did. We never changed a place to stay in the island. Everything is so close and yet the place is so quiet (not when we are there anyways) and so hospital. The guy who owns the place is an amazing dude who gives another dimension to the standards of the typical reception. We could have our beds cleaned and clean towels every day if we wanted to. Barbeque facilities and a nice kitchen helps you keep your budget low and meet new people and have fun with. 35 euros / per person-night is hell of a price in Greece of 2009 when everyone else may ask you around 50 during july and august. I don't really know how could it be better. I suggest you at least to give it a try if not making it a permanent stop of your trip.
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