Hi Charlotte. I live in Urbana. It seems to be quieter than Champaign, and I have never felt unsafe here. Many graduate students live in Urbana and it is easy to get to campus by foot, bike, or the bus system (students can ride for free with their U of I ID). Most of what is available in Urbana are houses separated into different apartments. There are also several apartment complexes in the area. I rent a duplex in Urbana. It takes about ten minutes to bike to campus and less than five to walk to my work at the public library.
You could probably find a nice place to live in Champaign as well, but I have heard several grad students say that they lived in Champaign at the beginning of their time at UIUC and eventually moved to Urbana, either because of noise/undergrad population or because they could find more space for less money in Urbana. I found my place on craigslist before I had even been to Urbana and (miraculously) it has worked out just fine.
As for smaller towns outside of Urbana-Champaign, I know one student who lives in a nearby town. I think you could possibly save money on rent, but you would have to have a car and the parking passes for campus are pretty expensive.
I would also check out the City Guide forum on Grad Cafe and the forum on city-data.com for more info about good realty companies vs. which ones to avoid. If you have any more specific questions you can PM me. See you in the fall!