Seeing as the town itself is a bit over-developed and the innkeepers surprisingly unfriendly, there's not much reason to leave the train station -- with its excellent, piping hot onsen (infused with sake) and the sake-tasting salon right there, and a range of local foods/souvenirs as well, it's easy to spend an hour or two here in the station before meandering outside. Ashiyu (foot onsen) are sprinkled around the town -- be sure to sample one or two of them if you do make it out of the station.
This quiet mountain village boasts a number of nice onsens. Though there's less traditional ambiance here, the famous gorge (pictured below) makes for a nice diversion between soaks.