@emma69:
You should look up Gora Hanaougi and Hakone Ginyu. They're still high-end and very nice, but they should be <<$1100 per night. If it doesn't have to be high-end, there should be decent places for ~$300 total for 2 adults inc 2 meals. Do keep in mind that there can be quite a bit of price difference btwn Fri&Sat nights and all the other nights. If you can, stay sometime during Sun-Thu.

Those are pretty harsh words, but you're entitled to your opinion. We have a lot of family friends in that area. The word "hideous" would hardly come to mind with Isawa. Non-descript? Yes. Anyways, I'm not saying it's a great onsen town or anything, although I have enjoyed my onsen stays there. Onsen and a bowl of houtou go well together. My point was that, when comparing equal caliber lodging, Hakone is generally not much different than places like Isawa in terms of room package rates.

Good call on Kinugawa, jpatokal. You look out the window from the hotel and you see abandoned buildings (presumably ex-hotels) on the river cliff, which is eery. The whole place just feels a bit decrepit. But the main problem I have is that, at every hotel I've stayed at in Kinugawa, the onsen just feels quite watered-down.