I guess your perspective on the food at iHouse depends from what your expectations are
I don't live there, but visited it a couple of times and was impressed by the food. It's quite nourishing, no junk burgers (European cuisine, although pretty basic), and most importantly cheap and conveniently located. Would I live there, I don't think I'd ever go eat somewhere else.
That said, I confirm that it's extremely tough to get it. I applied in May and was already waitlisted for iHouse.
Also, it's rather expensive. I think you pay about $1500/mo for the tiny dorm room (be it with free wireless and cheap food), while you can find a good place for under $1000 some 5-10 minutes walk from campus.
So I think your decision on where to live should be highly influenced by whether you want to "socialize" (undergrad style), or you prefer to have your evenings for yourself.