Banks charge you when issuing traveller's checks and then they charge you again when you change them into pesetas. It may be a better idea to get them in Euros (though banks will probably charge you a commission to change them into cash anyway).

I don't know any hostales taking traveller checks. I guess the main problem is hostales can't make sure checks are valid. Even my bank manager told me they would accept traveller checks issued by well-known companies and otherwise they will phone to check they are ok.