Translation:I sleep in the hotel but I eat in the restaurant.
Just to make sure I'm understanding this right: the preposition "i" used without a following article eclipses, but "i+an=sa" lenits the following noun. Is that right? 1) Ithim i mbialann. (I eat in a restaurant.) vs. 2) Ithim sa bhialann. (I eat in the restaurant.)
In the standard, that is correct. However, if you see it on the internet where sa eclipses, that isn't incorrect Irish - it's just dialectal.
óstán is in teanglann.ie - it's in listed in the entry for óstlann in Ó Dónaill's Foclóir Gaeilge-Béarla as a variant, and it is mentioned in one of the definitions in An Foclóir Beag, and it has a full entry in the Grammar Database/Bunachar Gramadaí and the Pronunciation Database/Bunachar Foghraíochta,
Óstán is preferred over óstlann in the New English Irish Dictionary at focloir.ie, and in tearma.ie, so it may simply be a matter of style - ósta and óstlann falling out of favour and óstán taking their place.