I've been staying at the "Yellow House" for a decade, give or take. As a scuba instructor, I've taken many classes up to Hoodsport for their open water weekend. Whenever it's available, we've always picked the Yellow House for our open water weekends. It is the ideal setup for a large group of divers. It has a large outbuilding with everything a group of divers may need: gear-up area, drying room, rinse shower, fresh water rinse trough for gear, etc. The water is about 100' away, across the street and down a flight of stairs. The dive park has a variety of habitats, laid out with guide ropes, but it's hit-or-miss when it comes to seeing marine life. In the past, I've seen octopus tending to her eggs, ling cod, gunnels, geoducks, grunt sculpins, moon snails, nudibranch, decorated warbonnets, and so on ... even an occasional wolf eel. But, some trips are better than others.
This particular trip was just friends and family. Half divers, half not. Everybody had a great time. The house has a lot to offer anybody, diver or not. The diving wasn't great this time. The recent heavy rains really reduced visibility and some of the bigger structures that tend to host a lot of life didn't really seem to have much. We found dens that were scattered on the outside with crab shells... so it probably has recently hosted octopus or wolf eels. But we didn't see any. Half our of group was non-divers. While some of us were blowing bubbles across the street, they were enjoying the board games, big screen TV, hot tub, and chiminea. "Town" is within walking distance, but be careful of traffic as there are no sidewalks until you get to the dive shop, two blocks north. The Mexican restaurant is always on our itinerary (the margaritas are strong, be warned). Try out the little shops a couple more blocks north or get your groceries across the street from the dive shop at the IGA.
The cost has gone up quite a bit since I started going years ago. But, if you have a group, it actually becomes economical pretty quick.
Tip: If you are a light sleeper, know that you will hear street noise in the three bedrooms. There isn't much traffic late at night or early morning, but you will hear cars and trucks as they go by. They've put white noise machines in the bedrooms, I did use one, and it helped a bit. But you may want to consider taking a bed in the basement dormitory or bringing ear plugs.