Short answer
Dayan for convenience and the classic old-town experience, Shuhe for quiet and a slower pace. Dayan is louder and busier; Shuhe is calmer but slightly less central for transport.
Dayan
Dayan is the postcard old town: canals, bridges, lanterns, and a dense grid of lanes. It is also the busiest. The bar street is loud at night, and the main lanes are packed by mid-morning. It is convenient for restaurants, shops, and the Mu Palace.
If you stay in Dayan, choose a courtyard guesthouse off the main axes. Ask about noise and vehicle access. The Dayan guide explains the neighbourhoods.
Shuhe
Shuhe is a smaller old town about 20 minutes northwest of Dayan, with cobbled lanes, a stream, and fewer bars. It is quieter at night and feels more residential. It is a good base for couples and light sleepers.
Shuhe has fewer restaurants and shops, and transport to the mountain or station is slightly longer. It pairs well with Baisha. The Shuhe guide covers the trade-offs.
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