If it's one thing that Kennywood needs, is hotels close to the park!
If you want a place that is close to the park, I would recommend the Holiday Inn on the Parkway East ($$). However, you mentioned the South Side, which your only option will be the Sheraton, Station Square ($$$). Station Square has some unique shopping, a few clubs and fabulous views of the city skyline! If you want to splurge, however, I would really recommend a stay at the Renaissance Pittsburgh Hotel in downtown ($$$$). Remember, the closer you stay to the downtown region (including Oakland), it'll break the bank! For more reasonable rates, you'll be looking at staying in the outlying areas of the city (Airport area (west), Cranberry (north), and Monroeville (east)).
As far as nightlife, head on over to the Strip District (just outside of downtown). There is an eclectic mix of clubs, mostly catering to the "just 21" crowd, playing mostly retro-type dance music. The South Side (Carson Street) district is another popular place. Nick's Fat City is a good place to go to hear live bands (that's where the "Clark's" got their start!) And Dee's is a great place to go for really cheap drinks (though it's sort of a dive, but a popular institution!)
If you like the more contemporary jazz & blues mix, I
highly recommend going to Dowe's on 9th (downtown).
Here are some good links to check out:
www.pghcitypaper.com www.inpittsburgh.com (both a good source for nightlife info)
www.visitpittsburgh.com www.pittsburgh.com