The documents state you are not allowed to reside there or limited to X days. Also, is it going to be continued to run as a hotel after the conversion and does any payments prior to the conversion go towards the mortgage?

As hotel unit owner, you can stay there as long as you like.No one will be able to evict you from your own real estate. 
However, in general terms, hotel rooms do not qualify as a primary residence.
Yes, the hotel will remain to be such. The hotel management company will rent out hotel rooms for the owners – if they so desire, and the income will be split with 75% to the owners and 25% of the income to the management corp.
No, until such time as the hotel condo conversion is complete any payments of $850 are considered only rent.However, considering what other hotels charge, a very low price that is based on the fact that you will become owner of the unit. Presently the hotel rents rooms to outside tenants for $350 per week.