I had a nice time in Asuncion last year. You can easily explore the few historical sites in an afternoon -- the Cathedral, Cabildo, Palacio de los Lopez, theater, old train station, independence house museum, pantheon (which was closed when I was there), etc. Everyone was very friendly and curious to know why I was in their city, which is a nice change from other more visited destinations. I then took a minibus to Encarnacion (about 4-5 hours) and visited two of the nearby Jesuit missions before crossing the international bridge into Argentina and taking a cheap domestic flight on AR from Posadas to AEP.

I would certainly suggest a visit to Paraguay -- especially if you've already visited the "obvious choices" in South America.