Hi Camou,
Indeed Dali is a good place, to relax and to visit.
So here are my own recommandations. please note these are based on my own experience, and that others' may differ. I've been to Dali quite a few times over the past 19 years, and witnessed many changes over time, in a good or bad way. My last time there was in 2009. Will go back this summer last days of July, first days of august.
1 - Unless you've made accomodation reservations ahead of time, you will NEED to arrive EARLY, as early as possible, because you will then notice that you are one among a heavy load of other folks chasing after a hotel/guesthouse, and it can become pretty busy in the summer.
By reading your message, I suppose that you plan on taking the plane to go there, right ? I don't know what time the first plane lands in Dali in the morning, but I would suspect night buses or trains to arrive before. Remember that they now only go to Xiaguan. Those days when Kunming sleepers went all the way to the old city seem to be long gone (someone tell me if I'm wrong please).
So that means that you will first be arriving in the morning in Xiaguan, and will then need to take a taxi or bus (another 30-40 minutes) to get in Dali old city. And just so you can get the picture : if you arrive in Xiaguan by 6AM, lets say that you'll then be in Dali around 7AM... well already will you be seing people looking for a place to stay !
2 - About places to stay :
The heart of it all ios called Huguo Lu (now also called Yangren Jie) where all the buzz started 20-25 years ago. DON'T look for a guesthouse there. Guesthouses on that lane are overpriced, overcrowded and overnoisy till late at night.
You might want to give it a try on Renmin Lu, now the prefered lane among most foreigners, a bit more quiet, a bit more laid back.
There are guesthouses and hotels now a bit everywhere inside and outside (but just right next to) the old city.
3 - Things to do :
Let me warn you Camou, nothing is really authentic anymore now in Dali, except for some of the homes and their inhabitants.
the rest has passed on to the god of commerce. Souvenirs and stuff are all fake. Old small portable wood shrines, tobaco or perfume holders, old jewelry, etc... all come now from Yiwu, a main trade platform city in Zhejiang province. same for the silver stuff... there is NO real silver stuff in Dali, no matter how much the vendors seem honest and will promise to you, no matter what certificate that they may show.
What you CAN find in Dali though are some old things like used little Mao Red Books, old 1960's and 1970's propaganda magazines, etc... other local specialties would be marble pots and vases, and tie&dye and batik fabriks/clothes. Some of these also come from the neighbouring Guizhou province, home of the Miao minority, famous for its fine embroidery and traditional clothes.
Places to see, free or with fee :
- Dali old city in itself, and you can climb up the stairs to the top of the walls that surround the city.
- The three pagodas - Dali's landmark I would say. there's an entry ticket.
- Zhonghe temple. That's a nice place to visit. It's about midway up on Cangshan mountain. You can reach there either by cable car, or by horse ride (with a local guy leading the way). The temple up there is nice, very quiet, offers an amazing view over Dali and Erhai lake and beyond (think as if you were at the top of eiffel tower). there is even a guest house upthere, and also from there starts a path (paved) that follows the mountain range horizontaly for a few miles. last but not least, there is a restaurant upthere where you will eat very good [chinese] food.
- Bicycle. that's the best way to enjoy Dali and it's surrondings. at the same level as Dali old city, it's quite flat from one end of the lake to the other, so you can ride your bike up north and stop whenever you want to take a look at :
- the paddy fields all along the way.
- Xizhou, a miniature and more preserved version of Dali.
- Shaping market, on mondays, at the very northern end of the lake.
- Take a boat to cross the lake and visit Wase Market for example, and other places as well.
Markets around Dali are a fun thing to see. Many of these still bare mobile dentists dispensing on-the-go consultations, where one just sits on a plain chair in the middle of the crowd, leaning its head back and opening mouth so the guy can choose which tooth to pull out. Only for locals of course !!!
Markets are also good places to eat local specailties and buy spices too.
Ok, I'll stop here, it's long enough as it is ! And it is not exhaustive, there are many more things to do in Dali for sure, but either others will post as well, or you will find out by yourself.
Wish you a nice trip !