In general, に is better suited for an on-going or habitual action, or some sort of state of being. Living in a place and being employed at a place would take に. (金沢に住んでいました。I lived in Kanazawa. ABC社に勤めています。I'm employed at ABC company.)
I think that the question/statement どこに泊まるか / ホテルに泊まる is more natural because it has to do with both a state of being/(temporary) habitual action.(ホテルで)何をするか, to me, seems to ask about what activities you may do in the hotel (watch a movie), but I think 泊まる is also applicable, although its obvious - what does one do in a hotel if not spend the night?.
The statement 部屋(に/で)泣いている wouldn't hinge on being in the continuative form (住んでいる、勤めている), but because it's an action and not a state of being; it could take a setting. In the statements. 部屋に読む, 部屋で読む, 図書館に読む, 図書館で読む, the particle で would be right. Although the verb "read" has seemingly more naturally related to "library" as opposed to "room," there is nothing in Japanese grammar which relates actions to specific places in this way. Japanese verbs and particles seem to hinge more on the difference between stative verbs and action verbs.
One way to approach this concept is to imagine you're writing a script for a play/movie (etc.). What is your setting? At the park, At the mall, At the library, In his bedroom... if you want to include the information where the scene is taking place, you want で.
If the location could give information about your character (he works at a car company, she is studying abroad in Rome), you might want to use に.
And に is also used when you're talking about doing something in a highly concentrated area: write in the box, draw on the board, put in the bag, sit in the chair, etc.