Where to stay?
We've not stayed in any of these hotels but we've used a bit of local knowledge to find some that we think are ok.

For those that don't know Sydney, Balmoral Beach is on the north side of the harbour. Balmoral is a quietish suburb and for that reason is not known for it's abundance of hotels. So for that reason, and the fact that it will only take a thirty minute cab ride to come from the south side, all our accommodation recommendations are from the south side of the bridge.

Beach
It's going to be high summer in Sydney when you arrive in February - for that reason the beach is the pick of all locations. So why not Bondi?
If apartment style is your thing you could try the Apartments, Bondi Beach http://www.apartmentsbondibeach.com/content.cfm?ContentType=Content&ContentID=1.
Not set right on the sand but only a ten minutes walk up the road. Just mention us & the wedding & they might give you a discount.

If hotel style is more what you're after Ravesi's http://www.ravesis.com.au/ is quite smart & has a great beach front bar. No complaints here.

City
If cosmopolitan living is more your style, then try the Kirketon Hotel in Darlinghurst http://www.kirketon.com.au/. Boutique style and surrounded by bars, clubs & restaurants. Very inner city.