That's what threw me into a panic, all hotels within walking distance seem to be sold out on the travel hero ironman link. The only hotels that seem to be left are drive minutes away, taxi.

Live and learn, book your hotel same day as registration.

For the last two IM Moos I have stayed at the Best Western Inn on the Park. It is about a 3 minute walk from the start. I would highly recommend it if you can get a room there. Right now it is booked, but just keep checking back periodically. In 2005, my wife and I were able to get a room there about one month before the race. Rooms might open up as people cancel or change plans.

Hey, I'm from Madison though havent done IMoo (give me a couple years I'll get there eventually) but as a local I have a couple other suggestions for hotels you might look into.
Sheraton-- it is along the shore of Monona, over near the Alliant Center stadium. I think you may even get a view of the swim course from some rooms. Very nice bike/run trail goes along the lakeshore from the Sheraton to the conv. center, I think about 1.5 mile. I think there is also a Holiday Inn Express right there.
Doubletree-- this is a big hotel about 10 blocks from the conv. center near to the UW.
Edgewater-- fancy place on the other side of the capitol from conv. center. Lake Mendota views. about 10 blocks away I think.
Part of the problem with hotels filling up is also that it isnt just the IM in town, that is usually also opening weekend of the college football schedule. And lots of alums come in from the rest of the state for that game every year, and so lots of the downtown hotels would be crowded from that anyway.
Maybe I'll try to convince my parents to turn their house into a Ironman bed and breakfast for the weekend...

Thanks all, good advice.