I was there last May, and towards the end of the month shore diving became impossible, so we just went on a liveaboard to the Similan Islands (Highly recommended) but even then 2 dives were blown out by the weather, I was told it was the last liveaboard of the year.
Check this page for some info on the seasons etc.
http://www.phuket.com/island/climate.htm
Warm water divers in Patong are an excellent crowd, as are Dive Asia.
If you stay in Patong, be prepared for an absolutely mental place, it never stops, everyone trying to sell you made to measure suits, fake DVD's and clothes etc.
Regarding hotels, I am afraid I can't make any recommendations as because I was there for a month, I stayed in a guesthouse in Kata Beach (£2 per night!!!). I do know that there are many levels of accomodations, from backpackers places (£2-3 per night) up to 4 and 5 star hotels (£Lots per night)
All in all the diving is excellent from the day boats, with some nice fast drifts and loads of life. At the similans we saw Manta, Whale Shark, reef sharks, frogfish, seahorses, turtle, sea snakes. Absolutely loads of brilliant life, and the water is soo warm, only wore a t-shirt to stop the bcd rubbing on my sunburn.
I hope this helps, but like I say, the seasons could be a problem but have a look at this site, tells you all about the dives, liveaboards etc.
http://www.diving.phuket.com/index.htm