We attended one of the festivals in Punakha back in 2023 and it was unforgettable - a true slice of life. There were musical performances and the equivalent of clowns and minstrels who had giant wooden phalluses and would playfully bump people on the head with them. Lots of families enjoying picnics and dressed in their very best.
If I recall correctly, the festival is about 90 minutes up a windy hill from Punakha, and we stayed for about 2 hours once there. Like others suggest here in this forum, I will weigh in as well: limit your time in Paro. Two nights is enough - one is the night before you hike to Tiger's Nest, and the other is the night before you depart the country. It's a lovely place but vastly outcharmed by the other lodges of Amankora. Gangtey is amazing and really worth a visit, if even for a night.
Punakha festival