As I live in Melbourne, I've never stayed in hostels here. The hostels in the CBD are close to everything, but St. Kilda is a very good choice. Depends on what you want to do, where you want to go etc. The tram takes you from St. Kilda into the city.
and walks along the beach are good - the Esplanade market is held every Sunday, and Ackland Street is fabulous. Good fish'n'chip shop there.

One thing you really should do - go to the Queen Victoria market, we call it the Vic market.
Are you planning any day tours? I'd recommend the GOR, and Philip Island. Chinatown is great - runs down Little Bourke Street, and the laneways have fantastic hidden gems. Section 8 is a great funky little place in one of the laneways - it's got this fabulous graffiti all over the walls.
You like Chinese? Shanghai Dumpling House - 15 dumplings for around $6.50. Great value.

I've been to Melbourne quite a few times, and I would definitely recommend Andrew's Burgers and A1 Bakery. Google them. Both are delicious and will not cause you to break the bank. Get a cheese pie at A1 for me!!

Have fun! Enjoy your travels!

I have decided to skip Oz Experience. It just doesn't seem like a good value and I'm 22 years old, don't drink all that much (yes to a few beers, no to binge drinking and blacking out) and I've already studied abroad in 2 foreign universities so I don't need the hand-holding and like to plan my own trips.

Sooooo I will be taking Greyhound MIni-Travellers Pass from Sydney to Cairns, stopping at many places along the way. I would like to do some YHA packages, like the Fraser Safari, Whitsunday sailing, and Blue Mountains (as they do seem like a good value) and in other areas like 1770 and Mission Beach, where there are great independent hostels, I will stay in those.

What does everyone think???

Thanks a bunch

A wise decision. The Cairns mini travellers pass allows you to stay longer and gives you the freedom of choice of destination. Remember Greyhound stops at designated bus stops, unlike the tour or backpacker ones which drop you at the hostel.

I stayed in several YHA's in Oz and NZ and they were great. Better quality than a lot of the backpacker hostels. Lots of backpackers staying in them and no problem with meeting others.
NO Families ever encountered - who thought this?.

I think you have made a good choice - you will have more time to enjoy the places you are at and less time travelling to actually get there in the first place.

You mentioned 1770...if you do go there, then I can thoroughly recommend staying at the "Cool Bananas" hostel. Excellent chilled out spacious place, free barbie on the night I arrived. They also organised sunset champagne looking out over the bay, also helped sort surfing lessons, and did boogie board hire. They also drop off and pick up from Agnes Water (the town where the hostels are and shops etc) to 1770, which isn't far away but it's nice to know you can get a lift. The beach at Agnes Water is fabulous.

Put simply, in 10 months in Oz it was one of the best hostels I stayed at, in a womderful location. Great place.