I can't say enough good things about this hotel and our stay. All of the staff were friendly and helpful and the grounds and view were gorgeous. We stayed in a deluxe ocean view room and it did not disappoint. The only thing I'd say that I took any issue with is the bathroom setup. Aesthetically it's beautiful, but practically ... not so much. The toilet has a sliding door without a lock and the shower is basically open. There is a curtain you can close from the bed side of the glass, but only on that side. If you're there by yourself or with a partner (and you're not shy) it's no problem, but I do tend to prefer a bit more privacy. This would absolutely not deter me from staying there again.
Regarding food, breakfast was excellent everyday. The dinner, for me, was a bit less so, but still good. My partner loved all of the fish and though I don't like fish as much, I always found something good to eat.
As for the location, it depends on what you want. For relaxation that's still close to restaurants and some shops, it's perfect. We didn't take the bus, but there's a stop immediately in front of the hotel to take you to the center and old town of Funchal. Walking takes about 25 minutes, depending on your speed.
We travel pretty frequently (once or twice a month) and this was one of the best hotels/stays we've ever had. I have no intention of staying anywhere else the next time we go to Madeira.