I lived there for more than 5 years and love to go back there at any occasion
I'll admit I hadn't heard of Hangzhou before I went, and it ended up becoming one of my favorite places I visited in China. The lake is peaceful and beautiful, the culture and history fascinating, and it's an easy day trip from nearby Shanghai. Worth it even if you can't swing an overnight stay.
I feel it is a little bit overrated. Although the lake was very beautiful, it was maybe the only place that was special. I feel there are better places to go to in China.