Since I arrived in Nepal, when I am not out adventuring or on treks, I have lived in Bhaktapur, which is located right outside Kathmandu. I have loved living here because of the access to great hiking paths, hidden valleys, and temples, and it is away from most of the noise and pollution.
But after visiting the main tourist area in Kathmandu (Thamel) a few times, I can see the advantages and disadvantages of staying in both places. If I were only in the Kathmandu Valley for a couple of days before and after going on a trek I would probably decide to stay in Thamel because it is the most happening spot, an easy place to meet other travelers, and if you were to look in a guide book it would probably be the recommended place to stay.
It is a difficult decision though because, in my experience, it is not a very authentic picture of what Nepal is like and the people who live here.
Before going to Thamel, other than on my way to Everest Base Camp, I had seen very few white people. I had just assumed that Kathmandu did not have that many tourists until I walked around Thamel and realized that all the tourists just congregated in one area.
The streets of Thamel are crowded with stores, people trying to sell you things, and white tourists with dreadlocks; at night there are a lot of bars and tourists out having a good time. Whether this is your scene or not is up to you. I am happy living outside of the city, and being able to go visit with reasonable ease.
My one major recommendation is that if you do decide to stay in Thamel remember that there is a world outside of those busy streets, and go and explore other parts of the Kathmandu Valley. Definitely take the time to see the beautiful city of Bhaktapur, and the temples in the valley, and check out Gundu Valley or the other mountain and valley villages outside of Kathmandu.
An easy way to do this is to rent scooters if you feel comfortable, or just take the public buses and walk. It is definitely worth it because these villages are truly something magical. The people living in them are genuine and happy to see tourists because it is uncommon.
They will invite you into their homes, let you pet their animals, practice their English with you, walk with you for a while, offer you food, tell you their names, yell and wave to you from windows, and give you the biggest smile you’ve ever seen. This kind of exchange is not possible in Thamel. So, no matter where you stay, see if you can catch a glimpse of both parts of the Kathmandu Valley.