The row of comedores alongside the bus station offers the best cheap meals in San Carlos [1] ($2 for a big plate). Otherwise, El Granadino serves chicken plates from $4, fish from $5. Its food is the best in town though slow to get to your table.
Down the block, popular 
Kaoma has a similar menu but better service with prices starting at $7; it’s open late on weekends.
The Mirador, aptly named for the landmark on which it sits, has good food and pleasant lake views from the outside seating area. Try the jalapeño steak and imagine shooting cannonballs at pirates.
Just below the cannons in the same area is the less impressive Mirasol, with similar fare.
Look for a new restaurant, art gallery, and souvenir shop called El Gueguense (tel. 505/8460-3504), quickly becoming an inexpensive gathering spot for both locals and tourists, also offering lots of local information.
Links:
[1] http://www.moon.com/destinations/nicaragua/rio-san-juan/san-carlos