I LOVE Queenstown and can't say enough good things about it.. It's a real tourist mecca though.. so that can be a bit overwhelming, I think you definately need to check it out though.
(Anyone correct me if I'm wrong I may be a bit biased) I think the South Island is far better in terms of skifields and there's more of them.
Hostels for $5.. I don't think so.. but you'd be looking at anywhere from $25 - $50NZ for cheap accomidation.. Or even I'd recommend hiring a campervan and just travelling around.. The south islands small enough to do that.. and if you're coming all that way you may as well see the whole country.
thanks lamb! do you have any details? like the name of the cheaper accomodations and skifields ur talking about? it would be cool to travel the whole island .. def.. i want to start putting this together ... thx again! also not sure if this forum allows email to users? but feel free to email the info to me if its easier that way..