The last time I was there (I think May 2006) there was a really good restaurant on the south side of the highway up on the hill, a little east of the main part of Salmon Arm - a converted house with a beautiful enclosed veranda where we sat, I think it was greek or italian, great food, very reasonable, highly recommended by the locals. I think it was called Mino's.
Not in town and not even open now but the resto at Salmon Arm Golf Club has some excellent fresh food and is just a few kms off the trans canada. On my journeys b/w Whistler and Calgary during the summer it's a place I always stop by to relax before the journey continues.
I did stay at the Prestige Inn once and their pub I wouldn't head back too. Everything seemed str8 from freezer to deep fryer and tasted like cardboard.