Otavalo markets are touristy, but they're not bad if you can bargain in spanish:
$12 for alpacca jumper
$2.50 for alpacca socks, gloves
$4 for alpacca scarf
$22 for stunning acrylic painting (OK, so I (chris) didn't do too good there, but I got her down from $35!)
My method: ask how much, offer 60%, and don't budge. People like a fair price and a quick sale.
Fantastic chicken fried rice for 2 people, $2.50! (go Otavalo!)