Gaucho100K,
As per my friend, currently the best hotel is
Casa da Montanha, in Gramado. Check
http://www.casadamontanha.com.br/cas...nha/master.htm
The website is all in portuguese, but I'm sure you can understand most of it (or use Altavista). Maybe I can visit this friend next weekend, than pass by the hotel and check it up.
Let me know the details of your trip (how many person, intended dates, etc) so I can check rates for hotels in Gramado and POA, car, etc.
Buenas,
Toxa