I am traveling through Croatia staying at several Sobe's. I was wondering if the prefered payment is in Euro's or Kunas.
As the official currency is Kuna, that is what you should use.
Rick's Croatia/Slovenia book lists some rates in euros, probably because that currency is more stable, so the numbers don't have to be completely overhauled for each edition of the book. The notations in those sections (e.g., p. 89) say, "while prices are listed in euros, you'll pay in kunas." Kunas is what the ATMs will give you and should also be the currency used for credit card charges.
We stayed in 6 different sobe's and they would take either. If you paid in Euro's they'd pull out the days exchange rate and let you know how many euro's. On our last day we wanted to use up our Kuna's before going to Venice and we paid our bill in both Kuna's and Euro's. Between using a credit card and paying for most things (including meals) in Euro's we did not use much Kuna except when we hit the ATM for small bills. Otherwise, I had a stash of 100Euro bills I paid the Sobe owner with.
Virtually everyone coming off the cruise ships only had Euro's and most places seemed to expect payment in Euros from those travelers.
I was in Croatia in September and found that some places would accept Euro and some wouldn't. Those that do accept Euro often provide a "less-than-favourable" exchange rate. It's usually better to use the "home currency" of the country.
I have no idea what the policy of Sobe's is?