Olite is a gem and the parador is wonderful. I actually posted quite a bit on Olite on the following (unfinished) :o N.Spain trip report: N.spain trip report
I stayed at the parador and it was in the middle of renovations in Sept. 2002. Definately request one of the older rooms. My room was a nice, typical parador type of room. I didn't eat at the parador as it was fiesta time and I was out and about quite a bit. However, the location is excellent - just off the main square so it's not too loud but right in the middle of things.
If you need anything else, just let me know.