well, my wife (soon-to-be) and I are going to live in one of those nifty new high rises nearby....BUT....
While at Admitted Students Day, I sat down with the Dean and I asked him that very same question (how close to school should you live). His response was that given the electronic age and, consequently, the availability of virtually all legal material online, a 1L might spend less time around the campus studying than he/she might expect. He felt living farther away from the school would be fine.
My feeling is stay around campus as a 1L and find this out for yourself. Maybe your never on campus outside of class. Maybe you find that you need the library to study. Maybe your study partners all live within a block of the law school.