In order to say:
While hiking, we used to go to a little restaurant
Would I say:
I'm not sure the correctness of any of those sentences however!
3 is the best way to express that meaning, although "lorsque" is also an option.
en+participle usually imply a mean:
En faisant des randonnées, je me maintenais en forme. (By going hiking, I kept in shape.)
Il a résolu le problème en cognant. (He solved the issue by hitting.)
Il est passé en courant. (he ran past)
"Pendant" implies that something happens at the same time as something else, usually in a different place. This may be habitual or a single occurence.
Pendant que nous faisions des randonnées, nos ennemis complotaient contre nous. (While we hiked, our enemies plotted against us.)
Pendant que je dormais, on me cambriolait. (As I slept, someone was burglarizing my home.)
