El cafecito is a hip, comfortable hostel in Cuenca. It has a great little cafe, right in the center courtyard, with delicious vegetarian food which is well-priced, and you'll feel right in the center of things there. The vibe is very hip...all young and oh-so-cool, but it's pleasant and not intimidating. We sat at a table playing cards for hours one evening and no-one bothered us to buy more. The te helado is *Excellent*, as are the pancakes...I've never had better.
The rooms are smallish, but comfortable. I think the rooms on the courtyard would be a little noisy with the cafe right there, but they close early enough (usually by 10-11 pm when I was there). The building is a lovely 150-year-old house, again with a central enclosed courtyard. There is a garden out back and there are rooms off that area as well, which is where my room was. The showers and bathrooms were clean, but the showers do close during the day, and you must put a deposit down to use a towel (refundable). The toilets are tiny. They do allow free luggage storage if you aren't leaving until late.
It was clean, comfortable, affordable (at present, $10pp) and there's some nice art on the walls. It's located 3 blocks from the Parque Calderon (convienent and wasy to get to) on Honorato Vasquez 7-36...best to get a map and walk there.