The castle rock hostel i stayed in should be good for the long term. The room i stayed in had 6 beds, they could of fit 10 easily in that room, so there is a lot of room to move around. Downstairs they have a large room with a billiards table, and also a quite room for reading, i don't remember seeing a TV there though, so if thats not a big thing for you then this should be a good place.
You are right under the castle, it is about a 10 minute walk from the train station. Most stores are located at the train station, so if you want to shop there you need to walk a little bit.
Hope that helps!