Hi,
I'm sorry to hear you had a bad experience in Oxford but frankly I'm not surprised. I've lived in different parts of Scotland and England (including London) and find Oxford to be the most expensive. It's not even that attractive - Bath, York or Edinburgh are far more beautiful cities.
As for hostales - I know that hostal Persal do serve breakfast in their bar. However so far as I'm aware it's the normal small breakfast - coffee and croissant (or small variations). As per other people's advice you can find this in 100s of different venues. As for the hostal Persal itself - not too cheap, but helpful staff and a good location for central Madrid. You won't be disappointed if you stay here; however it's not the cheapest you will find.