The other, Langholmen, was a great find that I definitely recommend. They offer both hostel and hotel “cells” in a nicely renovated prison! The single hotel cells are snug, but have comfy beds with plump pillows, phones, wifi, and nice bathrooms. The decorations are striped pillowcases and pictures of newspaper clippings of former prisoners. There is a pull-down bed on top and a trundle bed underneath if you want the full effect. There are double rooms as well with double beds, they are quite a bit bigger though, which is good if you have lots of stuff, but they loose some of that ‘cell’ feeling (which could also potentially be a good thing!). The hostel cells have bunk beds and hall baths and are without phones and linens (can be rented). Regardless of which room you choose, you’ll love this place.
Langoholmen is on a small, peaceful island surrounded by walking paths. Right next to the hotel you’ll find an area filled with lush gardens smelling of herbs and lilacs. Each small garden area has a little potting shed, some of which are big enough to have a dining table with a view, but most have a picnic table outside. 
The walking paths around the island are lovely, birds sing as you walk though trees and rocks overlooking the canal full of boats and beyond to the other islands. It is such a special area; it’s hard to believe the prisoners had this island to themselves. You can see a bit of the history in a walk around the island as well, you’ll pass the nice homestead of the original prison director, and if you want to know more, there’s a prison museum right inside Langholmen’s main building.
Langholmen has a morning breakfast Smorgasbord where you can fill up before your day – there are eggs, sausages, bread, jam, cheese, crackers, cold cuts, granola, yogurt, oatmeal, juice and coffee – you may not need to have lunch. Breakfast is included with a hotel stay, but 85 kronor extra for a hostel stay. There is also a café that serves lunch and snacks and a nice restaurant for dinner, or you can go right to the pub which serves dinner as well with a staff dressed in striped prison pajamas!
If your visit is during a weekend or in the summer you could try the Stockholm a la Carte website for great prices that really do make your trip affordable. Their prices include breakfast at your hotel and all transportation and museum admissions as well as some sightseeing tours. It is a real value during the slower periods when they help fill up empty hotel rooms and it may even end up being less expensive to stay in your own room at a hotel than at a hostel over the weekend.
For example: City Backpackers (along with some other hostels) charges a premium for weekend stays and they don’t include breakfast. So if you stayed there (at 345-520kr plus 65kr if you need sheets and a towel), paid 85kr for a breakfast buffet and bought the Stockholm Card (290kr for one day, 420 for two, 540 for three) to cover transit and museums it would cost at least 720 kronors for one day (about $108). It would be about the same cost for an a la carte package at a downtown hotel, but you wouldn’t have to share a room with 4-8 people and bring your own sheets, and if you’re willing to stay outside of the city center (after all you have free transportation), you can get a package for about 400 kronors (approx $60) per person. Solo travelers will be thrilled that there is no extra charge for single occupancy; it is exactly half the cost of double occupancy.
Even if you can’t find an a la carte package that you like, compare hotel prices with hostels for weekends and summer – a very nice double room at Langholmen is 1370 kronors and a simple room with two single beds at City Backpackers is 1120 on Saturday night and once you add sheet and towel rental and breakfast it is actually more expensive! So, I strongly recommend checking around.