I was in Budapest for one day in March of 2004 on a daytrip from Vienna.

The weather was decent. Our tour included a hotel luncheon but there were Easter markets open at that time and they had all kinds of traditional foods and pastries.

As for hostels, check out http://www.bugeurope.com for their recommendations. These are reviewed by users.

Sorry I don't have more personal experience to help.

Barbara in snowy CT