Just back from Delhi
I've been to Delhi a few times and everytime but the last I left with a 'Delhicate' health.
Paharganj is centric and convenient but the air is polluted and dusty because the market is crowded, busy with dirt (not tarmac + pretty dirty) roads. Added to that the taunts erode your patience to exhaustion.
I stayed in Carol Bahg once. It was expensive and the air wasn't much better than in Paharganj.
This last time I stayed at guest house in Majnu Ka Tilla, a Tibetan refugee colony in north Delhi, near the river. The air there is breathable and the place's a lot cleaner than many areas. The accommodation is clean and there are clean restaurants offering Indian and Tibetan food. Inexpensive as well, although is quite a way out. It can be reached by underground (metro) and a short (15Rs) rickshaw ride. If youíre on a bike, reaching Carol Bahg from there itís easy. Takes 10min if you don't get stuck on traffic but Most of the way is as congestion free as it can be in Delhi. I parked the bike overnight outside the guest house and had no problems.
The last time was the only I didn't left Delhi coughing my lungs off and a with a funny belly.