Short answer
Lijiang for the mountain, old towns, and Naxi culture; Dali for the lake, Bai culture, and a slower, flatter pace. If you have time, do both: they are two hours apart by train.
The case for Lijiang
Lijiang has the more dramatic setting: Jade Dragon Snow Mountain, high basin, and a dense old town of canals and courtyards. It is also the better base for Tiger Leaping Gorge, Shangri-La, and Lugu Lake.
The trade-offs are altitude, crowds, and a more commercial old town. If the mountain is your priority, Lijiang wins. See the Jade Dragon section and the routes.
The case for Dali
Dali is lower, warmer, and flatter, with Erhai Lake, the Three Pagodas, and a more relaxed old town. It suits cycling, lake villages, and travellers who want a slower pace. The Bai culture and food are distinct.
Dali is not a substitute for Lijiang's mountain, but it is a good complement. The Dali guide explains the two-night plan. The train makes combining them easy.
Related questions
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