Can skype be used to set up 10 phone lines for a small hotel so that each room can have its own phone and the phones can be connected to a switchboard.

Yes, you can use PrettyMay Skype PBX software for Windows to set up a Skype phone system for your business.
You just need one central SkypeIn number as the incoming phone number, and you will be able to have 10 concurent lines supported, and your employees are able to use Skype client/Skype phones to receive calls.

Reselling the skype outgoing calls to third parties (your customers) might contravene the terms of use. It is worth checking in detail before committing heavy expenditure.

Also run a quality check to ensure that the voice quality to the public phone system is acceptable before committing.