I took some passport pics from here itself for the medical examination. You can get them taken at Walgreens or any such place. I then went to Myown studio on another day for the other pics. By the way, please be careful even at Myown studio. Make sure they follow the instructions perfectly for the pics. I got a letter from USCIS last week saying they needed new passport pics because my pics were incorrect. So please make sure they are correct.
regarding the hotel, I would recommend a hotel near the consulate, ie in South Bombay. If you give me some names of hotels you have looked into, I can tell you which would be good. Hope this helps.