Fuzimiao Hostel is in a near-unbeatable location, close to the metro and just a minute's walk from Fūzǐ Miào. While dorms are basic and rooms can be scruffy around the edges, the rooftop beer garden is spectacular. Proximity to the canal makes mosquito repellent a good idea if you're sitting out after dusk.
The Fuzimiao area has a carnival atmosphere at night, with plenty of restaurants serving traditional Nanjing cuisine, such as honey-glazed lotus root and yánshuǐyā (Nanjing salted duck).