I have stayed several times (but not enough times!) at the Park Hyatt in the Rocks. It is a superb, small hotel with a fantastic view of the Opera House, Bridge AND the Circular quay cruise terminal. In fact it can't be more than a five minute walk from the latter.
The restaurant there is also excellent. Almost all the rooms have a harbour view but it is worth requesting this when booking to make sure you don't get one at the end of the bulding which looks right onto the base of the bridge! And all rooms have balconies, except the ones at the end...