Atami is at the edge of the Tokyo Metropolis; there are plenty of people who do commute that distance daily, though it's about 1.5 hrs each way if I remember correctly (last passed through in 2010).

Again, though I never stayed in Atami, most guides say that it's a bit lacking (mostly faceless concrete buildings). When I visited Izu, I stayed further down the peninsula in Ito (about 20 min by train away), and was quite pleased. Just something to think about.