You can book a hotel stay as long as you like and book a hotel with the discount as many times as you like during the promotional period. You are simply limited to park days because they offer four day tickets at the discount rate and you can not use multiple tickets for the same person within the same week to get more park time. Now, if you want more park days, some folks choose the water park and more option, which entitles you to four park days, without park hopper and four visits to water parks, Disney quest, or ESPN sports complex plus access to mini golf.
You cannot combine the hotel discount with free dining but you can purchase a dining plan if you are staying on site.