|Subject: Re: Online hotel reservations|
When you refer to using a "hotel website" to you mean a website that books many hotels or the individual hotel's own website?
I have used the latter and there is never a penalty for cancelling unless it's less than a 24 or 48 hour period (depending on hotel) and I never prepay. I give my credit card as a guarantee only.
If you're finding that this is not the case, then I would book through a company like American Express Travel (you don't need an AMEX card to use them). Or you can try emailing the hotel manager directly.
I never prepay nor would I ever pay a penalty to cancel. If it's a few dollars more for this flexibility, then, for me personally, it's worth it.