"Where to visit between Munich and Prague," if you don't want to "overcrowd" your itinerary, should probably exclude the Austrian towns and Budapest.
"If it helps: we enjoy local cuisine, wine/winery scenery, hiking, live music (from classical to classic rock), beautiful views, unique destinations, smaller crowds (I know I know - Oktoberfest is the exception)."
Good that you know what you want to see/do in a general way!!
I'd like to say that Oktoberfest was some grand experience that took my breath away... I just can't. It's an overcrowded beer fest. Nevertheless, it's famous enough to have attracted you to Germany, and you will have the 21st through the 25th - 5 nights - if you spend the final three nights in Prague, 6 nights if the final two are spent there. And that is a good amount of time to see some of Germany.
So I will not focus on additional places in other countries, but on GERMANY, which is the forum you have chosen, and on the INTERESTS you have stated, as well as places that are actually BETWEEN Munich and Prague.
WINE: Franconian Wine Country lies north of Munich. Würzburg (home of the Residenz Palace - a must-see UNESCO World Heritage site) is also a major train hub in the Main River Valley and the unofficial wine capital of the region. SEE THE MAP. Think vinotheques, hiking, biking, festivals. You can stay with one of the winemakers if you like.
IPHOFEN is a particularly picturesque historic wine village on the main rail line that leaves Würzburg for Nuremberg. Very much worth a visit.
Sommerhausen, Marktbreit and Ochsenfurt are charming wine towns closer to Würzburg. Video report by rewboss below. You can get to these places easily by public transport as well.
FRANKONIAN OPEN AIR MUSEUM: take a self-tour of this unusual outdoor museum showing how local folks lived in the area over the last 500 years. It's in Bad Windsheim (easy to reach by train.) On-site restaurants focus on local Franconian cuisine.
BAYREUTH is a nice town with a fabulously opulent opera house that you can tour. Maybe the opera schedule is obliging?
NUREMBERG is a fantastic and charming city, very underrated, very doable on foot for the most part. It has its own castle and numerous other sights. You might want to spend a few hours there if there's something you wish to see, but it's not about nature, hiking, etc. That said, it's a great place for WALKING through the handsome old town sector, which is largely car-free, and you are more likely to catch a concert or an organ recital in a place like Nuremberg.
BAMBERG (north of Nuremberg) is big on local beer and Franconian cuisine; its old town is also a UNESCO World Heritage site. I love the place.
Franconia may be unfamiliar territory - but for you, so are Budapest and Vienna, right? Don't let unfamiliarity put you off.