Try the Baymont or Motel 6 in Dale, IN.
I just stayed at the Baymont and it was pretty nice. Not as nice as say a Fairfield, but still clean and a nice hotel.
Oh and I just remember there is a Holiday Inn Express that looks nice that is on the exit where you get off I-64 to go to Holiday World. I'd try there first. I can't seem to find it on the holiday inn website, weird.
www.holidayworld.com has links to most of the local hotels.
Santas Lodge is a bit expensive IMO.