Hostal El Refugio, Pucón
Started and run by a Dutch ex-pat and his wife — both of whom work as snowboarding instructors on Volcán Villarrica — El Refugio is a great little house-like hostel, in the middle of tiny Pucón. Always filled with backpackers, come down here to climb the volcano. Has a nice lounge room where you can sit by the fire, watch TV, lie in the hammock-seat, play darts, or share a bottle of red with your fellow guests. And as Pucón goes, it's very reasonably priced as well. Was recommended to me, and I recommend it to you as well.
Rooms: one cosy dorm with 6 beds, all fitted with thick doonas plus extra blankets (which are most welcome, around here in wintertime).
People: nice (if small) group of backpackers, most of whom are just passing through for a few days.
Staff: Peter and his wife Lorena are a great and friendly couple, and the other helpers in the place are most hospitable as well.
Location: one block from the main street of town.
Food: no free food (except tea), but you're welcome to buy supplies from the supermarket down the road, and to cook whatever you want in the well-equipped kitchen.
Internet: 1 PC, available for unlimited use — if you're around during the day, you get it pretty much all to yourself.
Hot water: not reliable, in my attempt-to-shower experience here.