The hostel is excellent, and the location is great, you have to check out the cocktails at caffe bar XL a few doors up the road, very good and cheap. There's loads of other bars too.
It's about a 15 minute walk (a little longer in heat with your pack though) from the old town, and only 2 minutes from Hotel Bellevue, which has an excellent beach you can use for 10kuna a day (about £1, $1.50).