Originally Posted by
JohnnyColombia
I second this, it is a Flyertalk firm favourite. Get a rental car from Pueto Montt airport, drive to Puerto Varas. Next day drive to Petrohue, drive up Volcán Osorno, have a hot chocolate. Drive back down, have a leisurely driver around Lago Llanquihue until you reach Frutillar, have tea and cake, drive back to Puerto Varas
That leaves you 2 spare days, I would honestly be inclined to stay in Puerto Varas, maybe a drive along the coast a bit.
Ancud on Chiloe is a place where I have had happy times, to really push it you can probably make it to Valdivia for a night but Ruta 5 tolls are not as cheap as they used to be. I love Valdivia, a trip to Niebla is a favourite, a boat ride around the rivers, a trip to the Kunstmann brewery, decent restaurants. According to Google Maps, Ancud is about the same time-wise as Valdivia, I would probably pick the latter.
If you have to choose, I'd choose Chiloe (head down to Castro or points south) over Valdivia. I also advise not to drive over the back side (North/East) of Lago LLanquihue. The road is unpaved (unless there have been recent improvements) and precarious in spots. The other rides (out to Petrohue, and as far as Pto. Octay on the north side of the lake, is fine. Pto. Montt to Pto. Varas is only about 15 minutes on a nice highway, so even if you don't stay in Pto. Varas (which is very scenic, but very sleepy), you'll be there quickly. I've had many a tasty lunch @ Angelmó (in Pto. Montt) - I just have them make a mixed seafood plate.