Penn Station is essentially 1 block away from MSG Dan - but with the way everything connects underground in New York it's right there.

If I were you I would check out the Southgate Hotel - it's across the street and down two blocks and it used to have some of the most reasonable rates in the city.

I checked for the website and it got bought out and is now called the Affinia Manhattan:

http://travel.yahoo.com/p-hotel-3459..._tower_hotel-i

It's a nice place - Paul and I have stayed there many times for MSG events.