The three I'd look at in town are the Fairmont Princess, the Rosedon and Royal Palms. Rosedon has a steep driveway. Royal Palms is the furthest walk, with an uphill/downhill walk.

When my in-laws would come visit, they always wanted an in-town B&B. We never had a whole lot of luck finding one that worked for them - FIL has a bad knee and lots of walking was out. They did stay at the Rosemont occasionally (not to be confused with the Rosedon) - good location, just up the hill from the Rosedon and the Princess, kitchenettes in rooms, nice enough, but you're still dealing with a fairly steep drive to negotiate.

If you're not opposed to a bigger hotel, I'd say your best bet for not having to deal with hills is the Princess.

First off, if you haven't been there before you are going to LOVE Bermuda. It truly is a little paradise.

There are plenty of B&B's/vacation rentals. If you want to be within walking distances to shops/restaurants your best bet would probably be St. George's or Hamilton but Hamilton may be be a better option for the winter as it will be livelier.

Bermudarentals.com and Bermudagetaway.com have tons of vacation rentals/B&B's listed. We have used both of their services. If you decide to look into St. George's I suggest Samaritan's cottage.

http://www.bermudagetaway.com/
http://www.bermudarentals.com/

You might also want to consider Oxford House. They do have rooms on the first floor. As txgirlinbda says, the Fairmont is on a relatively level main street and has easy access to a number of good restaurants. If you are considering it, join the President's club (it's free and they give upgrades if available, plus some deals). Also check out the Bermuda tourism webpage www.gobermuda.com They are running some good deals (I am staying six nights, paying for four). If you are willing to consider using the ferry for travel, that opens up a couple of other properties as options. Newstead, Watercolors (may involve steps, ask the owner) are both nice options.

As dontcallmecass says the two websites she listed are very reliable and do offer some fantastic deals.

Bermuda is a wonderful destination. I am heading there in a couple of weeks for a holiday. December weather is usually temperate, but do bring a jacket.

Have a wonderful trip. Bermuda is another world!