I realize this thread is a couple weeks old, but if you haven't already made your decision, I urge you to check out Rancho Armadillo in Playas del Coco. We just returned from there a couple days ago. We spent five nights, and four days diving with Rich Coast Diving, and both were FANTASTIC with a capital F!
If you want an Americanized resort experience, Ocotal is fine. But Rancho Armadillo is something a bit more unique, and IMO way more enjoyable: it's a large ranch owned by a former Texan, about a mile out of town up on a hill overlooking the town, so the views are stunning. Rooms are in small buildings scattered across the property, and there's a main public area with a big pool, dining area, hammock area, and a big industrial kitchen that you are free to use to cook your own meals if you want, or you can have Rick (the owner) prepare meals for you. Breakfast is included, and it's superb - incredible fresh fruits, all kinds of breads and rolls, fruit smoothies, and a make-your-own waffle bar with various fillings and toppings.
Rich Coast Diving did a great job for us. We had our own car, but the owners of the shop live two doors down from Rancho Armadillo, so they just picked us up every morning and drove us the mile to the shop. We did three days local diving, and one day at Catalina (Bats is out of season right now - currents too strong). All were wonderful. I'm getting my photos together and will be posting a full review within the next couple of days.
I truly believe Rancho Armadillo is the best option in Playas del Coco. The town itself is a little trashy - fun, but just a typical beach town. Rancho Armadillo is close enough to walk into town if you want, but far enough removed that you aren't in the middle of the crowd. And it's spectacularly gorgeous! And Rick, the owner, makes you feel like you are a guest in his home. It's a bit more expensive than some of the hotels in town, but it's totally worth it.
Check out the reviews in Trip Advisor - it's been the #1 spot in Playas del Coco for years. I haven't had a chance to post my review yet, but I'll be giving it 5 stars!