I stayed in hostels almost my entire time in Ecuador. I loved it. And you don't have to stay in a huge room with other travelers if you'd like privacy. Many hostels have private rooms for singles or couples that run about $20 a night or so. I also stayed in a hotel in Quito for a bit that was about $18 a night that had cable TV with Warner channel in English (Big Bang Theory, The Middle, Two and a Half Men, etc), and while not plush, it was decent, quiet, and clean.
I loved this place in Banos (yes, I'm gonna talk about Banos as always). It's $12.50 per person, but they also have free dinner three nights a week. This is a nicer sort of hostel, so it's a tad more expensive than you can get, but it gives you an idea. I left a review under Brandon8080. You'll see some poo pooing about the showers being cold, but that's typical for Ecuador. Hot water is hit or miss and was mostly ok at this place. http://www.tripadvisor.com/Hotel_Review … vince.html
If you want to research some inexpensive spots, try hostelworld.com. Again, many of these hostels are very nice and not some barracks you'll be sleeping in. Plus, I just loved the atmosphere. To me, a large part of traveling is meeting other people from all over the world. I enjoyed it so much getting to hang out with so many wonderful foreigners. The cool hostels will have a bar area and TV's and pool tables where everyone mingles and drinks together. You can talk with them about your plans the next day and usually get invited to go with their group on some exciting adventure. Just a personal word of advice, I personally wouldn't book my room through hostelworld.com. They take like 10% off the top for the reservation promising to give you a refund, but you won't get it. Find a place you like and then google their website to get their number or email address and then write/call them for reservations. You may even get a better price in the end than what's listed. Hostelword won't list the phone numbers because, of course, they want the fee to book through their own site.
I'm a freak for the little city of Banos. I can not sing enough praises about Banos. If you go to one place in Ecuador, go to BANOS! If you'd like the names of some other popular spots, Montanita is popular with the tourist crowd (little beach town), Otavalo (wonderful craft market), Cuenca (beautiful architecture with cobble streets), and Tena (I don't know what the hell is in Tena but people were always going there). Stay in Quito a couple of days and go to Mitad del Mundo (The Middle of the World) to see the equator. There are also some super gorgeous old buildings in Quito. Go see the sanctuary in the Monastery which took 70-something years to craft by hand. Incredible stuff. And eat some Guinea Pig!
I wish I was going with you guys. I really wish I could go back several months to when my South America trip was about to begin and do it all over again. I'm jealous of you guys. Take care and have a fabulous trip.