If the flight into Sacramento is significantly cheaper, I'd say fly there. It's a farther drive away (45 minutes to an hour?), but since you'll only be making that drive twice, that doesn't seem a big deal to me. (On the other hand, if you decide to stay in Reno, flying into Reno is obviously the better choice.)
Casino hotels in Reno will definitely be the cheapest accommodations (especially mid-week), but you might not enjoy having to make the drive every day to Squaw (Yahoo Maps says 44 miles and 48 minutes from Circus Circus and that seems about right to me). We stay at Circus Circus once or twice a winter, but we have small children and the Midway makes it more attractive for us (I love those Imperial Acrobats of China). Also, if you stay there (or in the Silver Legacy or El Dorado, which are connected by an indoor promenade that has shops, restaurants etc.), the El Dorado has a kick-ass all-you-can-eat buffet. We're generally not much on all-you-can-eat, but this one is really good: a lot of different types of food, good desserts, and, like most casino eating, not very expensive. Another restaurant that we always hit when staying at Circus Circus is the Golden Flower (Vietnamese food) right across the street.
We've stayed at the Best Western in Truckee (13 miles and 25 minutes to Squaw, according to Yahoo Maps) and thought it was just fine. The free breakfast is acceptable, but mediocre, and there are no choices: I doubt you'll be happy eating that every morning. They have a hot tub on site. Mid-week rates are especially cheap (about $95) if you have a Snowbomb card (they've had a discount the past few years, but I haven't confirmed that they have it again this year). Here's the link to the Snowbomb card, which also provides discounts on lift tickets ($10 off at Squaw and a free lift ticket for Sugar Bowl or Kirkwood, if you're so inclined) and other stuff: http://www.snowbomb.com/tahoecard/
A place that we've stayed that I like is the Franciscan Lodge in Tahoe Vista (16 miles, 27 minute drive time to Squaw, according to Yahoo Maps). You're right on the main drag, convenient to a lot of things, but you can get a unit far enough off the road to not really know it's there. I like the ambiance of the place. We've only stayed on the forest side, but the lakefront units look like they'd be really nice, though perhaps they make more sense in the summer. Every unit has a little kitchen (as far as I know) and some have a fireplace or gas woodstove. Here's the link: http://www.franciscanlodge.com/index.html
Another couple of places in Tahoe Vista (same owner, I think) that look good to me, though we've yet to stay there, are The Rustic Cottages (http://www.rusticcottages.com/mainpage.html
) and Tahoe Vista Lodge and Cabins (http://www.rusticcottages.com/mainpg2.html
I also agree with those suggesting that you check vrbo.com.