I've stayed at the youth hostel in Jeddah (known as the 'Bait Al shabab') several times. It is located next to one of the sports stadium, and there are some nice restaurants within a couple of Km along the high road.
Accommadation cost about 8SR (approx £1.30) per night. 2 beds to a dorm. Spotlessly clean. I think that it is government subsidised and under used. It had a small gymnasium and a large swimming pool. Also their breakfast was decent (scrambled eggs on pitta bread and a nice hot cuppa). You'll have to have a IYHA card to use their facilities, and always ask to speak to the manager, who is usually the only person who speaks English. They may demand a couple of copies of your passport. They have branches all over Saudi, all pretty much at the same rate. They are male only hostels. Further information can be found on the international IYHA website.
Hope this helps,