Most of the guide books reccomend Otepaa as 'the centre of a pretty, rural area with small lakes'. Sadly, this review was written by a local who probably has not ventured much beyond the city limits. As a summer destination you should give Otepaa a wide berth. It really seems to be somewhere the locals go in winter for a spot of cross country sking . However, as a summer resort it's a serious let down - it is somewhat jaded and to be honest, there is nothing worth seeing apart from a 17th Century church in which the Estonian flag was consecrated but, it looks pretty grim and vandalised up close although from a distance it's relatively attractive. Sorry to be so negative about somewhere. (to put it in perspective, this was the only place we hated in a three week tour of the Baltics - see my other journals).
Furthermore, no matter what advice you are given, if you do brave it and visit Otepaa, don't visit the Puhajarv - an allegedly mystical lake - which is to be honest, a large puddle with some unremarkable pine trees around it.
You would be much better off visiting Kallaste on the shores of Lake Peipsi - see my journal Kallaste. Don't say you weren't warned!