This hostel is by far the best quality hostel according to the Lonely Planet. Of course I have not been to all other hostels in town but being an experienced traveller I can say that this is indeed a very nice and friendly hostel with excellent facilities.
The hostel is situated in 25 de Mayo, a street crossing the main drag San Martin, right in the middle of the center of town. It is about 400 meters to the Beagle Channel, uphill. There are 4 dormitories of 4 and 6 people, and 5 or 6 double rooms. They are all very clean. The rooms have a small window and a heater, which are needed in this part of the world. The beds are excellent, with a hard (not too hard) mattress and soft pillows. Towels come for free when asked and the bathrooms are spotlessly clean. Free soap dispensers in all showers are a nice extra. And the hot water is reliable (very hot actually). The kitchen is not too big, but spottlessly clean again. There are plenty of pots, pans, and cutlery to prepare a nice meal for yourself if you are sick of the huge steaks serviced in this country.
The staff are very friendly, speak English well, and are happy to direct you in the direction you need. They will even make bus reservations for you if your Spanish is not good enough.
The sitting area is tastfully designed and well lit with small lights. Lots of wood give this place a warm atmosphere and it is not too dark. The hostel is quiet at night and lively during the day because the real backpacker looking for other travellers and no locals for a change know where to go... El refugio del Mochilero!
At the time of this review, current prices are 20 pesos for a night, or about $7 US dollars.