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Few comments over excellent suggestions above:

  1. We were at Quilotoa two weeks ago. The trail from Q to Chugchilan was washed out so locals did not recommend walking there even with a guide (I did same hike last year) and the dirt road for cars also looked very bad. So condition may not be ideal to travel to Chugchilan. Otherwise, I really like the area. In Chugchilan, I prefer Mama Hilda, excellent and friendly place at the fraction of the coast of Black Sheep, which tag I simply cannot stomach. In Q. itself, hikes along an down the rim are great as well as a boat ride over the lake. Accommodations and food are cheap, if basic.

  2. Termas de Papallacta is a great place to relax but expensive to most backpackers. But we could manage by going there with whole family and renting a family cabin (2 floors, sleeps up to 6) and you get semi-private pools. There are less expensive places there, of course. It is often misty or rainy but you still can enjoy great hikes and guided at Explora-something outfit are knowledgeable and inexpensive.

  3. Laguna Cuicocha. There is a cheap hotel with a restaurant, I believe it is called Mirrador, but I may be mistaken. It was listed in my old Rough Guide (I just checked e-version of LP and it does not have it.) When we stayed there in 2010, they had rooms in the building where restaurant was: it had heat but not ht water or rooms in a 1-story barn-type wodden structure with hot water and stoves (but make sure to get plenty of wood before they are gone for the night.) We loved the experience, the sunset was majestic, though it got very cold at night.

Enjoy your travel!
/alter

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11
In response to #10

I thank everyone for their suggestions, great response. I will look into all of these.

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12

If you are looking for a place to rest, enjoy stunning mountain views, eat good food and have the opportunity to meet locals, then the Hostal Llullu Llama in Isinlivi is a really good choice. We went there just a week ago for 3 nights and it was just lovely! We stayed at one of their Garden Cottages which have a private bathroom, great hot water shower, a chimney and we enjoyed sitting on our private balcony looking over the really stunning landscape. The hostel has a sauna as well for ultimate relaxing! Great place!

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13

In the Otavalo area, there is a new retreat center built on the side of the hill with stunning views of San Pablo Lake and the surrounding volcanic peaks. The sunsets from the deck here are unbeatable. The eco-retreat is called Sacha Ji. It may be more of a splurge than you're looking for but certainly fits all of the other requirements. Otavalo is just 2 hours north of Quito

Mindo (as recommended above) is also a wonderful choice if you're looking for a more tropical environment. About 2.5 hours NW of Quito

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