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Upper Fells Point/Washington Hill/ Butchers Hill/ Patterson Park are all north and east of Fells Point. They are all considered transitional neighborhoods--much better than they were 15 years ago. You can usually get a bargain if you look hard enough. In terms of crime, they are no less or more crime-free than Fells Point itself. But, they are away from the water and further away from downtown in some cases. Look at the sticky at the top of the forum for information on each of the areas. Spend time in each, both day and night. You will be your best advisor and find what you are comfortable with. In answer to your question of decline, the opposite is true. All of those areas have made tremendous progress but still need some work. In time, your investment will pay off but not for the short-term.
In terms of Federal Hill, anything along Fort Street going to Fort McHenry is perfectly fine. That actually is probably one of the safest areas in the city. Water taxi service is available from a number of locations around there.
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