The only hostel I am aware of is in Allentown. It is called
Hostelling International Pittsburgh. I've never stayed there, or heard from anyone who has, but the
website sure makes it look decent.
This hostel would be about a 15 minute drive to Mr. Smalls.
As far as safety goes, Millvale is a pretty safe area. Its a pretty sleepy area of Pittsburgh, not much going on there except Mr. Smalls.
Allentown, on the other hand, is not exactly the nicest part of Pittsburgh. If you are street-smart and used to urban life, Allentown would most-likely not be of any major concern to you. If you are looking for a nice, quaint little part of town to stay in, Allentown wouldn't be it. During the day the area around the hostel will be fine, just be careful and use common sense at night.