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The albergue is excellent. It has a kitchen and there is a shop in town, but the food in the last restaurant in the village is excellent. Not sure of the name, I think @mspath has mentioned it, but I can't find her post.
Like Kanga I, too, enjoyed eating in Valcarlos. During the past 11 years always staying at the municipal albergue often I have eaten in the dining room of the nearby Casa Marcelino with a menu del dia that is copious, delicious and a great value. Since the Casa is located at the western end of town on the calle Elizaldea perhaps it is the same spot that Kanga enjoyed.