Not sure how this place is at other times of the year, but in autumn it is a very pleasant place to be.
This town has plenty of hiking trails to do in the summertime. The greenery is astounding, and the temperature is cool enough to keep the hike pleasant. I walked the trail from Mine no Cya to the Shirainotake waterfalls. It continues further down to more waterfalls, but as I was pressed for time, I only managed to squeeze one in. The hike I did took approximately 50 minutes. The path is well marked and it is a very pleasant walk. The waterfalls are pretty, though, nothing to write home about. It is usually crowded there too, as it seems most Japanese like to just go see the waterfalls as opposed to walk there.
To get to this hike, you can take a bus from the Karuizawa train station, and it leaves from the 2nd stand. Just ask the bus driver if the bus goes to Mine no Cya. Get off there (it's about 35 minutes) and the trail is right across the road. If you stop your hike at the waterfalls you can take the same bus back down to town.
There are plenty more hikes, and the tourist/information office at the train station is very helpful. You should go there before you set out to do anything. Though their English is scarce, they are very efficient and determined to help you out.
This place does a pretty good lunch set for 2000 yen or so. In my case a good steak hit the spot nicely.
Food and service both of high quality
Sorry, I can't tell the exact name and address of the shop for they don't want to put an ad on a paper, guide map, and they even don't run a homepage of their own.
But what so special of this shop is that the shop used have been loved by John Lennon. He'd often visited this shop for brunch with Yoko Ono and their son Sean.
Favorite Dish: The most famous menu John Lennon loved is told pan cake and blueberry juice.
In addition, their curry is great, too.
As Karuizawa is quite spread out bicycles are a handy way of getting around town. There are a number of bicycle rental places in Karuizawa.
There is no reason for you to ever take a taxi in Karuizawa. Apart from the fact that they are incredibly expensive, bus routes cover virtually every corner of the town. Karuizawa is also quite beautiful and there are many beautiful things you can look out on from your bus ride. Just make sure you allow yourself enough time to get around, the buses can take a while to get places. The best source of information I found was the tourist office at the train station. They will be able to help you and give you the schedules you need. All the schedules are both in Japanese and English.