This hostel is in a great location and has a really fab vibe. The staff at reception were the friendliest we have experienced in the whole of our stay in China. We stayed in a double private room and it was a good size. Not the most modern but everything you needed. Bathrooms looked like they had been updated and there was a good shower. The hostel itself has a lovely atmosphere. There are little courtyards with seating areas where you can chill out and chat.
The restaurant is small enough but the food was excellent and reasonably priced. One of the nights we went to the bar which is underneath the hostel. It had a great party atmosphere. Some people have mentioned that they could hear the noise from their rooms but we couldn't. I don't know if thats because of the position our room was in of not. The location of the hostel is great. It's a 5 minute walk to the city walls where you can hire bikes to cycle around.
We only stayed here one night as they were booked out so we moved on to their sister hotel which is the Han Yang House. By far we preferred the Shuyuan Hostel and wished we could of stayed there for the whole of our time in Xi'an