The Deganwy Castle Hotel is to become a Boutique Hotel, Restaurant/Public Bar and Apartments, according to the Weekly News. Good news. 
It's good that's its gone public I can now talk about it. I understand it will be a 8 room hotel. The old health club and the function rooms will no longer be part of the hotel and will be converted to apartments. The frontage of the hotel will have the 1960's extensions removed, and will take it back to the picture as shown below.
The hotel and bar area will be in the oldest part of the building, with the apartments on the the wings either side of this.
The more recent development on the railway side will be demolished and will be rebuilt in a modern design. This was advised to differentiate this from the original building. The footprint (not height) will be increased slightly in the new build. It will be closer to the railway line, but windows are orientated away from the properties on the other side of the line. The windows will be directed up the estuary towards Conwy Castle.
Dave your hopes that the grounds will not be developed have been answered. The carpark areas will be maintained and the areas will be landscaped providing outside space for the bar and restaurants. The lawned area will be maintained.
The existing entrance to the Hotel from Station Rd will be maintained (including the pillars), but will be for pedestrians. A new wider vehicle entrance will be produced next to the existing entrance. The fountain will be removed to make way for the new entrance and relocated within the grounds.
I'd encourage people to see the plans next week, to see the detail for themselves.
It does look like a very good scheme, and we always thought there would have to be a compromise between a hotel and residential. The fact a bar and restaurant will return is great news.