The last couple of times I was up there, I dropped in at a very small cafe in Katoomba (on recommendation) which I cant recall the name of :-[.
I think its called the Blue something, is situated in Katoomba St, on the western (main) side, nearly all the way down to Waratah St at the southern end.
The owner has a bit of a beard, uses Morgans coffee, has a ECM Veneziano and 3 grinders (for milk based blend, espresso blend and decaf). His main grinder (milk blend) is a big commercial doserless (German I think - he wishes he had 2 more of it). Makes a very nice cuppa.
Anyway, they also do a very nice brekkie or lunch.
Sorry I cant think of the name - Im sure someone else will know.