It's too bad you can't find a room in San Sebastian. I'd do my best to try to find a room if at all possible there.
Between Lekeitio and Hondarribia as a base for 3 days (if you can't find a hotel in San Sebastian) I guess I'd have to ask what other places you want to vist in the Basque country.
Lekeitio is further away from San Sebastian but it is closer to Bilbao, Gernika, Getaria, etc.... Hondarribia is only 30 minutes from San Sebastian and is closer to the French Basque area (St Jean de Luz, Biarritz, etc....).
Another option may be to base yourself in Zarautz, less than 25 minutes from San Sebastian and a stone's throw from Getaria.
Hotel Villa Itsaso isn't in Lekeitio per se - I think it's about 3 KM outside of town. Hotel Palacio Oxangoiti is located in the village of Lekeitio. Some people prefer to be located more central while others like a more rural setting - no right or wrong answer just personal choice.
I've never stayed at the Hotel Jauregui in Hondarribia but I have enjoyed pintxos in their bar. The hotel is relatively new (I think opened in the last 5 years) and is in the lower town (versus the medieval quarter) - good central location. I really enjoyed my stay at the Hotel Obispo in 2005 - it's in the more atmospheric medieval quarter but everything in Hondarribia is realtively nearby. I'd probably choose it for atmosphere over the Hotel Jauregui but either is a good choice.
Hope this helps.
Edited: 04 August 2010, 7:53