You plan on going to Istanbul, Cappadocia and Ephesus, that is almost identical to the trip I took in April, 2002.
I stayed at the following places:
In Istanbul I stayed at a bed and breakfast called Hotel Askin, it is located by the Blue Mosque. It was simple and small but very clean and inexpensive http://www.istanbulshotels.com/askin_hotel.htm
In Cappadocia I stayed in Goreme at another bed and breakfast called Walnut House, the room and breakfast were $14.00 per day. I don#t think they have a website. If I were to go back to this area I would be more adventurous and stay in one of the many cave hotels or pensions. I would have to say that Cappadocia was one of the best holiday experiences of my life. The fairy chimneys are incredible. If you haven#t already done this I would highly recommend taking a hot air balloon ride with Kappadocia Balloons, I don#t think you could find better scenery anywhere.
I didn#t stay in Ephesus but close by in Selchuk at a pension called Jimmy#s Place http://www.artemisguesthouse.com Very nice pension centrally located.
I travelled by overnight bus between the locations and didn#t have a problem with it.
Let me know if I can offer any other information.
Sylvie in Toronto