Ooops, just realized we fly into Munich during Octoberfest

In your case, I suggest you change your plans. Just getting into Munich will require 45 minutes from the airport. Munich > Dachau > Munich will require close to an hour's transportation.

What if you were to just go somewhere that's unaffected by Oktoberfest and high prices? My choice would be to take the train from Munich airport to Garmisch-Partenkirchen, in the German Alps. G-P, where the 1936 Olympics were held and Sonja Henie won another gold medal, is surrounded by some wonderful stuff...

The Zugspitze, Germany's tallest Alp
The Partnach Gorge
Mittenwald, the Alpine village with the Karwendelbahn lift and a museum for violin-makers and musicians
The Fraundorfer Inn, with its Bavarian Evening entertainment

From G-P there are direct trains to Innsbruck and to your destination in the Dolomites from there.

A day pass (Bayern Ticket or Regioticket Werdenfelser Land) will get 2 people to G-P from MUC airport very cheaply.

I think all this would be a lot more enjoyable than staying outside Munich and commuting back and forth to Munich and to the overwhelmingly-depressing Dachau KZ.

I'm guessing the Fraundorfer will require less than €150/night for a double.

Rosenheim is about 40 minutes by train from Munich and about 50 minutes from Dachau.

Rosenheim is also a stop on the direct train to Bolzana.

Check out the hotel prices and take into account rail fares back into Munich or Dachau.

This is absolutely the wrong time to be in Munich if you don't want to participate in the Oktoberfest festival activities. I suggest you stay a long ways from downtown Munich if you don't want to pay the high price for being right there for Oktoberfest.

In October, 2007, I arrived in Munich to take my landmark car-less trip up the Romantic Road. Like you, I had naively thought that because I was not going to be right in Munich, it wouldn't matter.

I arrived in Munich in a Thursday morning, the last Thursday of Oktoberfest, and immediately went to the Hauptbahnhof, from where I walked the about 1 km to Marienwiese, ground zero for Oktoberfest. After looking around at the beer tents, I went back to the Bahnhof and took a train to Oberammergau, my accommodations for the night. I don't recall that Oberammergau prices were inflated for Oktoberfest (that was in 2007). On Saturday morning, I started my trip up the Romantic Road at Wieskirche. I spent the night, the last Saturday night of Oktoberfest, a big night, at Augsburger Hof in Landsberg am Lech. Again, I didn't think prices there were inflated due to Oktoberfest.

So, my advice to you is to look for places well outside Munich. Anywhere near the Hbf is going to be pricey. Marienwiese, ground zero for Oktoberfest, is only a short walk away. I like Freising, near the airport, but I think hotels there jack up their prices for Oktoberfest. I image even Dachau will be affected. Landsberg is a pretty town, just about an hour by train from the Munich Hbf, and on the same side of town as Dachau.

You might be better off on the east side of town, closer to the Dolomites, but I can't suggest anywhere. Unfortunately it's touristy (Herrenchiemsee) and likely to be affected by prices in Munich. Oberammergau might be a place to look at. Outside of a Passion Play year it might not be too expensive. From Oberammergau, you can go straight south through Garmisch-Partenkirchen, Mittenwald, and Seefeld, avoiding Munich, to Innsbruck where you can pick up the train over Brenner Pass to the Dolomites.

This map shows the railway and bus lines that serve the region south of Munich which Lee and I have suggested; it includes the towns of Oberammergau, Garmisch-Partenkirchen, Mittenwald and Innsbruck . Red lines are railways, green lines are bus routes.

Garmisch-Partenkirchen is likely to be sold out, and if not, the hotel prices will certainly carry a "Octoberfest" tariff. It's only an hours train ride from there to Munich. Nuremberg would be a better choice; it's an equal distance away but slightly less likely to host a large fest going population of tourists.

But if you have to go to Dachau I'd look at the small towns around there on the train line. Or seriously consider staying in Augsburg, a good city to explore on it's own, hotel rooms can be had for less than $200/night even during Octoberfest, and it's an easy train ride to/from Munich. 45 minute ride, multiple trains hourly.