Can anyone suggest a favorite small town in Bavaria or Austria?

Based on the requirements you listed, Garmisch-Partenkirchen would be a good fit. It's somewhat of a large town, but it has a good bus system. GaP isn't known specifically for it's spas, but there is a large indoor pool/bath facility. Some of the more upper tier hotels also offer spa services. I also like Oberstdorf. I don't know if there's a public spa here, but like GaP, some of the fancier hotels have them. Oberstdorf is smaller than GaP, and hence, a little more manageable by foot. I also like Lech am Arlberg in Austria, but this town is hard to reach without a car.

If you go to G-P, stay in Partenkirken. Up at the end of the town, nearest the ski jump are wonderful walking zones, painted houses, markets, etc. Some larger hotels have spa services. Can ride trams to trains and over to Garmish area. Also it is a short train ride up to Mittenwald which is my FAVORITE small town. Also if over near Salzberg, I really enjoy Zell am See. Small but lovely on the lake surrounded by mountains.

Saalbach-Hinterglemm, Austria area is your ideal. Can be reached by public transportation and have gondolas open winter and summer for foot traffic. Even Zell Am See would work, but it's more American touristy.

I'd have to second the area around Oberstdorf. There are actually a number of nice towns in the Iller valley from Oberstdorf to Immenstadt i.A. In addition, above Oberstdorf is the scenic Kleinwalsertal, a little bit of the Austrian Vorarlberg isolated from Austria by the mountains, only accessible from Germany. There is a spa, Wonnemar, in Sonthofen. There is a train running up the valley from Immenstadt to Oberstdorf and buses to the surrounding towns. When you stay in the Oberallgaeu, you can get a week's pass for all the regional trains and buses, including the bus into the Kleinwalsertal, for €17/p. For another €3,50, you can get an Anschluß ticket for a round trip by bus to Fuessen or to Lindau.

Thank you - all of you - for your interesting suggestions. To clarify - I'm not so much interested in spa facilities as in the fact that a spa - German "Kurort" Bad...this and that..would have more restaurants, parks and shops and perhaps small museums etc. than the average small town. It's really hard to make a decision with so many wonderful places to chose from. Lee, thank you for mentioning the week's transportation pass. The last time I was in Germany, I made many spur of the moment decisions and paid really high train fares. This time, I want to plan ahead. Thanks again, everyone! Anna

If you're going to be in Salzburg, use it as a base to work out of. Buses go to places like Berchesgarden, Innsbruck and other places of fantastic scenery. About every person I ever met in Salzburg was like a local tour guide. They're just so accommodating and sweet people. I'm particularly fond of the Innsbruck area. Up and down the valley are great small towns, some of which are up on the plateau above town. Mass transit links the towns. Some great villages are up in the clouds above Innsbruck, and they have walking trails. Stay in one of the small villages, and buy a round of drinks in the local bar. It'll be the last drink you'll ever buy. They'll just take you in. Friends on a trip with us one night went up into the clouds. After a long night in the bar, their only way back to their car was "by toboggen." They were whizzing through the fir trees at 50 mph on a 3' long luge. It was the greatest night of their lives. God sometimes takes care of drunks.

If you don't have a car - Oberstdorf. Fly to Munich, S Bahn to main Munich train station - Local train non-stop 3 hours to Oberstdorf which is end of the line and right in town. There's a therme, lots of restaurants, spectacular sights of 7 valleys and mountains with several mountain lifts which may be included in your rental (look for the green sign). Great public transport to the mountain lifts within easy walking; bus to Breitachklamm a fairly easy hike; Marktbaehnle excursions including Culinary all day with several stops to munch your way through the area ... then go soak at the therme mineral baths. Nearby Bad Hindelang via Bus has a blacksmith where you can purchase handmade skillets at a reasonable price and a cheese place with homemade milk, buttermilk, and that boasts the best bio cheese in Germany. O'd is a great place to relax and beyond! My third visit coming up in May!

Anna, Although it doesn't have a Spa, I can't think of a more beautiful or picturesque location than Hallstatt. A week would probably be too long, but you could split that with a few days in Berchtesgaden or other locations. Hallstatt is not far from Salzburg, and easily reached by train (one change at Attnang-Pucheim) and of course a short trip on Stefanie across the lake. Happy travels!

This may be stretching your territory a bit but we have thoroughly enjoyed Linz, Austria, Ulm, Tubingen, and Bad Urach, Germany. Linz, especially, if you want to get into the Tyronean culture, and Salzburg if you want to see the mountains.

We have been to Mittenwald in the winter, and that was a cozy, mountain town. It was also very easy to get to by train. I have not been to Hallstadt, but it's on our list to visit. It looks beautiful! One town VERY close to Munich that seemed nice (we have visited twice in the winter), is Herrsching. I am not sure if they have a resort, but the town is situated on a lake, and looks like it would be very relaxing in the summertime. Andechs Monastery is also close by, and we love visiting there. I think there is even a hotel connected to the monastery. I don't know if you are a beer drinker, but it has the best beer in all of Germany! :-) Here's a link to some information on Herrsching. http://www.live-like-a-german.com/destinations/show/herrsching Happy Travels!
Amy