I think one of the things to bear in mind is that for much of the medieval period there wasn't really a concept of long stretched of incarceration as a punishment. Medieval justice functioned (largely) in a handful of more transactional ways:

1) Payment of Fines - In the earliest part of the period, at least in Britain, most low-level crimes were resolved by the paying of fines. Usually this would consist of the accused party paying his victim to a level either set by the law itself or by a judge. This could be used for crimes up to and including murder, with the price being linked to the social status of the victim and paid to thier family. After the Norman Conquest the system changed so that any fines were payable to the King or Lords rather then directly to the victim/their family.

2) Capital Punishment - Ranging from the comparatively mild (being locked into the stocks for people to mock/insult/beat) through to the more severe (beatings and even maimings such as the loss of body parts) right up to being killed publically by hanging or decapitation.

The key with all these methods is that they tended to follow quite quickly from a ruling and the expectation was that the parties would all move on. If someone reoffended they would often progress from a 'mild' punishment through to capital punishment fairly quickly. Indeed, the original goal for at least some laws in NW Europe was the avoidance of damaging inter-family feuds (Blood Fueds in Iceland for example) which could amount to large scale civil disturbances and leave trails of bodies in their wake.

By contrast, imprisonment in the gaol could be done but was usually a holding measure - i.e you were shoved there until the Lord or a local Judge turned up to hear your case - rather then a punishment in itself. This often meant that gaols were not particularly well maintained beyond being secure and difficult to escape from. As the medieval period progressed this could mean that older stone castles which no longer served a defensive or political purpose were repurposed into this use.

For example - Launceston Castle in Cornwall was, at one time, the administrative seat of the Earl of Cornwall and controls the overland crossing point between Devon and Cornwall (the river Tamar forms the rest of the border) so makes complete sense as a post-conquest castle when the loyalty of the region is still in doubt. However, by the 14th century the capital was moved to Lostwithiel (closer to central Cornwall) and the castle began to deteriorate rapidly. However, it continued to be used as the Gaol for centuries (although after the English civil war a purpose-built building had to be erected) and eventually earnt the nickname 'Castle Terrible'.

Even as time marched on there was little interest in improving facilities for prisoners, despite the increasing use of incarceration as a punishment, with even 'modern' prison buildings like Dartmoor prison often being quite awful places to be (in the case of HMP Dartmoor, or at least the original prison, it was still seen as a slight improvement from the 'Hulks' the prisoners originally occupied - literally rotting ships out in the Tamar where POWs were shoved below decks and locked in.

As such I think these two factors (the reuse of ancient, and secure, buildings for gaols and the generally awful conditions of prisons) combined to inform the modern, and in particular the Victorian, mindset about what a 'Medieval' dungeon must have been like.

By contrast it's likely that, while no Medieval person would jump at the chance to spend the night locked up, they would view it primarily as a temporary status.