I advise you to stay there if you are looking for a budget accommodation in Katherine. We went there three times and stayed one night each time, in between excursions. The staff (two cool hippy mature guys) was really great, very helpful and friendly, and remembered us. On the last day they told us we could still use the kitchen and swimming pool after check out, and offered to give us a lift to the bus station.
We stayed in a large twin room with a kitchen, bathroom, TV, air conditioning. The furniture was a bit old but overall it was clean and a nice room for the price (cheap). The place looks more like a motel.

I stayed in this hostel two nights when exploring the Katherine Gorge. It is a former motel, with some rooms converted to dorms. I stayed in a double room (which could actually sleep 3 people) and we had our own fridge, bathroom and TV. The room itself was a bit worn but overall it was OK. The guest kitchen could have been better (the micro-wave did not work) but the staff was nice. The location is good, just a few minutes walk from the big supermarket.
Overall, it is good value.