We stayed at the Bull, it was very good. Food a bit hit or miss. We had the suite on the top floor which was great for us (2dds, 3 and 5 at the time). We've also stayed at The Ilchester Arms in Abbotsbury and in cottages round the area.
Do go fossiling, they absolutely loved it!
Best place to eat is the Riverside in west Bay, which is why we keep going back to the area - it's SO good.