Valparaiso was perhaps my favorite city of my South America trip.
First, it's only a two hour bus ride from Santiago, so easily accessible from a major metro area.
Second, it's physical set-up resembles San Francisco in its hills! There's are hills filled with colorful houses (and run-down shacks, alas) that sit atop the main town area bustling below.
Third, there's an artistic, laid-back vibe that seems authentic to the place and very accessible. I'd analogize it to Carmel or Monterey, California.
Walking the streets of Valpo, staring up at the hills, staring out at the water, eating some ice cream while sitting in a park: it's all just lovely lovely lovely.
I stayed up in the hills, which, come sunset, creates an awesomely tranquil and romantic setting to look out over the water and boats. The one downside to staying in the hills is that restaurant options are limited — best to explore the downtown area by day, and eat dinner there, before retreating up for nighttime.