You might investigate one of the cooler hill villages half way (best of both worlds) such as Lythrodontas - but it all depends on whether you want to have access to other expats and how far you're prepared to commute to schools etc. ...
the first route will start from blythrodontas/b and travel to mathiatis, ayia varvara and finally nicosia. the second route will cover the villages of ayia anna, psevdas, kornos, delikipo and terminate in nicosia. ...
If you do want to stay in Nicosia, the follwing hotels are the best of the bunch. I am making enqueries into self-catering apartments too and will provide that information when I get hold of it. Nicosia does not have an enourmous range ...