If you are looking for somewhere to stay in Matsumoto, then look no further than Ryokan Seifu-so. I've now stayed there twice and couldn't recommend it highly enough. It's great value, the staff are friendly and the rooms are great. The place has a very 'family' feel about it and you certainly feel right at home.
It is located slightly out of the main town area, but this is more than compensated for by the fact that they offer a pick up and drop off service to and from the station. They also have bicycles that guests can use for free. On my most recent visit it was raining a little, so instead of using the bicycles we just walked everywhere. The distance from the ryokan to the center of town and the main tourist attraction in the area, Matsumoto Castle, is easily walkable—it is a lovely stroll along the river.
The staff at Seifu-so speak English, and they have even prepared a hand drawn map of the area showing their recommended restaurants, izakayas (Japanese bars) and tourist spots. Be sure to ask them about the tickets they are selling for Matsumoto Castle; if you purchase your ticket at the ryokan you can get in for half price (300 yen instead of 600 yen).
The ryokan itself has two buildings: the main building and the annex. On my first stay I was in a Japanese style room in the main building, and on my second stay I was in a Japanese style room in the annex. According to the website they also have some Western style rooms.
Our room in the annex had its own toilet and basin, and there was a shared shower room (i.e. one person used it at a time). However, as we were the only guests, we had the place to ourselves. In the main building the toilets and bathing are all in shared facilities (bathing with others); however, the staff are very accommodating, so if you wish to be able to bathe in private, just ask and they can close off the bath for your private use temporarily, or you can use the shower in the annex.
The annex has a self-catering kitchen, but for lunch and dinner I would recommend trying the many restaurants and izakayas that Matsumoto has to offer. For breakfast, I recommend the Seifu-so breakfast. You have a choice between Western style and Japanese style—both are delicious and come with unlimited tea or coffee and juice.