We also visited the main plaza, Parque Abdón Calderón, which has tall palm trees and a beautiful church. The Museo de las Culturas is off the plaza next to a few nice restaurants but was closed at the time of our visit.
Cotacachi seemed much more peaceful with just as much authenticity of Otavalo. If I make a return trip to Ecuador, I will choose to stay in Cotacachi rather than Otavalo.
Buses from Otavalo are just US$0.25 and run through Quiroga before reaching Cotacachi. You can catch a return bus to Otavalo in Parque Abdón Calderón.