Mountain Village is probably your best option at this point
Most of in town is probably already booked or it will be
Mountain Village will have parking and you can take the
gondola over the mountain into Telluride and back for
free, and a short walk to the Festival.
What’s your budget per night? You definitely want to stay in Telluride if the budget will allow. The festival is held on the eastern part of town so the longest walk you’d have would be about 20 minutes from accommodations on the western part of town.