Hey Brian,
I would definitely recommend La Chimba Hostel in the Bellavista district. you can find details of it on Hostelworld.com. The owner is really friendly, and it's more like staying at someone's house than at a hostel. It takes about 10 people only, so it's really cosy and friendly. Bellavista is a really lively part of the city with lots of great bars and restaurants.
If you are looking for a bigger hostel with more backpackers passing through try La Casa Roja in the Barrio Brazil - this is the student area of city, also very lively at night.
Or, if you fail to get into either of those, the HI on Cienfuegos is also a great spot with an outdoor bar area.
Hope that helps!
Ev