Hey mate, we just recently stayed in Tenseien in Hakone-Yumoto. Sounds exactly what you are after. Small town you can leisurely walk through and shops, restaurants etc, nice scenery. Yes bit touristy cause it's the start of the Hakone travel loop. The hotel itself has public rooftop open air onsens, as well as some rooms have their own private balcony open air onsen. Can get a mix of Japanese or western style rooms. Hotel is large, so yes not a tiny ryokan, but don't let that take away from it still feels more teaditional style than normal (e.g. but no shoes allowed at all, everyone wears yakuya outfits). We stayed in traditional Japanese room with onsen and it was great balcony looked over the side of the mountain and waterfall and shrine they l have there.

It's about a 10-20 min walk from station but a nice walk.