Hostels that I have paid for on-line and then later changed the number of days, checked out early, showed up a day or too later (always calling or e-mailing to let them know) have always adjusted my bill. That's not to say there are not some slime balls out there - make sure you read the cancellation policies.
As far as booking ahead, I think that depends on what kind of person you are. I am a planner....I tend to do way too much research prior to a trip, I like to know the lay of the land ahead of time and like to book the places I am going to stay ahead of time. I do not like the idea of wandering aimlessly around a city looking for a place to stay. If I book ahead, and show up and the place is a pit, bad locations, etc., you can always change. However, its a personal thing....many people think its more adventurous/fun to be spontaneous and find a place to stay once you arrive in the city.
"Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety." Ben Franklin
"The plural of anecdote is not data"