Front Royal works. I stayed at the Quality Inn; they gave me a shuttle back to the trail in the morning. Everything you need is within walking distance. The Hilltop in HF isn't much like a motel or a hostel... somewhat dingy rooms, but a million-dollar view. Obviously some "grand hotel" from yesteryear.
I wouldn't camp on the towpath. Too busy, no way to "stealth," at least not anywhere near the town. It's a very popular venue for day hikers, joggers, strollers, bicyclists, etc. You're better off heading south if you want to spend the night in the woods.