well I'm bumping this up because I just asked the same question (on the Pacific Northwest Board). No one responded there either.
Sandpoint is a small seasonal resort town so you are not going to find any stellar dining options. I will give you my take on Sandpoint Dining. NOTE: I do not live in Sandpoint but I stay in Sandpoint 6-8 times a year so I have sampled quite a few places.
*** Places I would gladly go again
Joel's is the best Mexican in Sandpoint.
Spuds is good for sandwiches/lunch items.
Dockside makes good pizza and a surprisingly good Gyros.
Ivano's - Northern Idaho's answer to 'good' Italian.
La Rosa Club - It's a bar with very good (American style) tapas.
Hydra Steakhouse - Pretty good for North Idaho, plus I like the ambiance.
Little Olive (Greek) - Not as good as everybody raves about but it's decent.
Hoot Owl Cafe - (just a little north of Sandpoint) A greasy spoon north Idaho diner that serves exactly what you would expect at a greasy spoon diner with the ambience being that of North Idaho - if this type of meal is what you want you won't be disappointed. Personally I suggest going there for breakfast just to experience it.
219 LLC - IT's a DIVE bar, no food, but if you have never had a drink in a real dive bar I suggest you go in just for the experience.
*** Places locals rave about but I find them to be only average (meaning edible
Bab's Pizzeria - Slightly better than national chain pizza but almost double the money.
La Fonda Mexican (They are actually hit and miss, some things are really good while some items are so-so.)
Joe's Philly Cheesteak & Hoagie - Not bad, just nothing incredible, I find their food to be salty but no-one else seemed to think so. I should also say that this is not my 'type' of food so maybe it's better than I portray it.
MickDuff's - Basic bar food , good beer selection, I went once and wouldn't go out of my way to eat there again.
*** Places that I think are over-rated and suggest you think twice before you spend your money there
Jalapenos (Mexican) - It won't kill you but there are better choices
Both Thai places - I feel sorry for them because they simply cannot get the ingredients they need to make the food tasty. They are trying but if you are used to real authentic Thai you will be sorely disappointed.
Both Sushi places - Same as the Thai places, it's northern Idaho so the fish quality is poor and never very fresh.
Arlo's Italian - If you like olive garden you will love this place.
Golden Dragon (it's in ponderay )- stay away, stay very far away, you have been warned.
Yes, never eaten there, it's in the Lodge at Sandpoint, which is actually across "the Long Bridge" and south of the city of Sandpoint. The lodge itself is beautiful and the only rumors I have heard about the food is that it's pretty typical hotel/resort fare, ie. overpriced for what you get.
EDIT: Forgot to say that the views of the lake from 41 South are supposed to be some of the best, so that's probably what you are paying for.
Thanks again for the advice - my update
Spuds - was good for lunch
Dockside (heard it closed, couldn't find it)
41 South - was good, I would go again, beautiful view
Panhandler - wouldn't go again
Connie's - much better, think old school diner type place
Also went to
Trinity - it is at City beach in a Best Western (I know, scary sounding). Food was okay, view was great
I would agree it isn't really a "foodie" destination and the best stuff is probably good at best but it fits the town and I would go back to any of the places I went except for the Panhandler, if I was back in town.