A lot of the hotels in Sorrento (and Italy for that matter) do half board as standard, it seems to be their thing there. We were there in 2003 and stayed in the Bristol - it's just outside Sorrento. Half board is ok, wouldn't win any prizes, I would say just about ok.
We only ate out one or 2 nights, found it fairly reasonable, not cheap like Spain is. Probably about 80% of what you'd spend here on a typical meal. Drinks were generally the same as here - maybe €4 for a bottle of beer. There's a really nice bar in the centre of Sorrento called Fauna - the people watching and the service there is pretty good.
We ate in one place near the old harbour, it is a bit away from Sorrento town center, it is build on a pontoon / floating restaurant, off the beaten track and full of locals. Can't remember the name though...