Mexico City is HUGE!!! Something like 28,000,000 people in the general area, and it is very polluted. You'll fly into a orangey-yellow haze that will burn your eyes if you are not use to it, you'll smell the sweet smell of sewer just under your feet you can see through the grates on the sidewalk... I nice mix of burritos and post burritos. Not sure I'd waste a week there ... plenty to see but to much of a headache to have a good time.
Not really aware of any hostels in Mexico like in Europe, but hotels are plenty and it depends on your standards, if you'll stay in hostels I'd say they're not 5 star standards. LOL I never looked for them so I don't want to say 100% they aren't there, but I think that's more of a European thing.
What no hanky panky ... what's the point?