I've stayed at hundreds of hostels in my travels. What to take depends on what you need and where you're going. I went to Brazil for 3 months with a small daypack. For 5 days, I'd need very little other than what I'm wearing and my bathroom kitbag. I have a rule to "always carry a condom" though.
Your list sounds fine but I would include a bar of clothes washing soap so you can do laundry such as washing socks. A smaller towel is a better idea. Big towels are heavy and take up space. They also take longer to dry. Most hostels have towels for free or charge a small amount.
A vital thing to also bring is a medium sized padlock for storage boxes in rooms. ALWAYS protect your valuables.
The sleeping bag liner is nice but not necessary. Almost every hostel supplies sheets and they're usually fine to sleep with.
I rarely make reservations at Hostels. The key is to arrive at about 10 am to noon as this is when people are checking out. An exception is when you're getting a private room, which is tougher to get than a dorm situation. Also, check the room before you pay. A room filled with other guys can smell pretty bad.
I'd suggest the dorm situation if you're traveling alone. It's the best way to meet people from all over the world. Also some girls get naked on a regular basis in the mixed dorms because they're from Europe or just like to show off. Not that I mind.
There's some good hostel search sites such as hostelz.com and hostelworld.com that let you search by country and city. It's a good way to check prices and even see photos of hostels that are available.
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