"He is in the castle."
Translation:Hij is in het kasteel.
You'll find this extensive grammar explanation to be helpful. :)
You use "Hij staat in het kasteel" when you want to explicitly state that the person is standing, which is not the case in this sentence. You cannot derive that from the context (also because there is none).
You would say "Hij zit in het kasteel" if this person is stuck inside the castle or, again, when him sitting there is explicitly relevant.
When you're talking about a person being inside the castle in general, you should use the verb 'to be', or 'zijn'.