It is always good to stay or have meal in one of the Paradores Nacionales. Olite's one is particularly nice, with nearby Castle and old town.
The restaurant is located in a old part of the castle typical of the Navarra gothic, the lounge is really cozy.
Like in all Paradores, you can enjoy local food: the 30€ menu is a good option with starter, second dish and dessert. The meal is extremely good, the vegetable too. Perhaps the desserts are lower level.
A highly recommendable place to enjoy historic place and good local food.
PS: a good selection of local and Spanish wine.
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