can anyone recommend a (for youngsters affordable) guest house in the Blue Mountains ?

Try Antillys....I am not so sure of the spelling.
A really great place.

i dont even know if it still exists but at the base of the peak there was a lodge that we all took school trips to, "whitfield hall" i think, if stil open, it is a kid friendly hostel enviroment, and trips to the peak can be arranged. i promise a wonderful adventure in these beautiful mountains, enjoy and walk good