La Crucecita ("small cross," or town square) is located about a 5-minute drive from the hotel. There are plenty of restaurants (though we weren't adventurous enough to try any) and lots of shopping.
Typical Mexican souvenir shops abound, with silver jewelry, textiles, pottery, and painted wood carvings.
Our favorite shop was Museum Artesanian Oaxaquenas. It's on a side street (Flamboyant Street) just a few shops off the main square. It's a painted-wood carving and pottery mecca.
While you are in La Crucecita, go inside the church on the main square to see "the largest painting of the Virgin Mary in Mexico."