Yamada Onsen is an amazing place, which is really a hidden gem. This is one of my favorite destination in the country, and I have been there several times...
For a stay there, I definitively would recommend Taki No Yu ryokan. A very simple and economical place, but with one of the best onsen in Japan, and really nice food for the price.
Link :
http://www.takinoyu.jp
For the access, this is more tricky. I have always drove there, by far the easiest solution. There is a bus running from Nagano to Yamada Onsen town (40 minutes) and then you need to take a taxi, or perhaps you can arrange to be picked up by the ryokan...
For the hike, I am not sure (always been there in winter except once). But I am confident the area must offer many possibilities for people who want to hike, as it is close the Manza and Kusatsu...