After getting some great information and advice from participants on this site, I thought I would provide a report on our time in Santa Teresa last week.
We stayed at Blue Surf Sanctuary and loved the property, location, and most of all the people working there. It is located on the northern end of town which meant less noise and dust than the other properties closer to the center of town. Given the location and the dust along the road, I would highly recommend having a rental car unless you just plan on staying close to the property for your entire stay.
We found that the restuarants we visited were all very good, but the prices were higher than what we had hoped for. It was pretty comparable to what we would pay in the U.S. We had meals at the following restaurants:
Las Piedras (great Argentinian BBQ)
Ritmo Tropical (great pizza)
Kika (very good fish and pork dishes)
Burger Rancho (good food and free wi-fi access)
El Tomate (good pizza and pasta)
El Pulpo (good pizza and pasta)
Tres (had coffee, smoothies and used free wi-fi)
All of the restaurants we visited or saw were along the main road and were open-air places. The atmosphere was mostly nice, but the dust from the road seems to settle on everything.
We cooked several meals in the community kitchen area at Blue Surf Sanctuary. The grocery prices were also higher than expected, but consistent with the higher prices we've seen at home also. If you need to purchase American brand things like Doritos instead of the local tortilla chip brand, be prepared to pay some steep prices. The fruit available in the markets was outstanding and the prices seemed reasonable (especially for bananas which were about 5 cents each).
There isn't much to the "town" of Santa Teresa besides small hotels, restaurants, a few grocery markets, and a handful of surf/souvenir shops. The biggest downside, in my opinion, is the dirt road that runs through town. The traffic from cars and ATVs causes a tremendous amount of dust to settle on everything nearby. I was very glad to be driving my rental car (yes, contributing to the problem) as others were suffering while walking or riding bikes, atvs, etc. Many people were wearing eye protection and bandanas or dust masks while traveling outside of cars along the road. Although I didn't care for all the dust, I'm still glad I chose to visit Santa Teresa as the positives (mainly the beautiful beaches and great surfing conditions) far outweigh the dust problem. Also, I was in town for the very busy week between Christmas and New Years. Most every hotel was completely booked up, so I'm sure the dust was worse than other, less busy times.
The crowds also contributed to the problem getting money from the 2 ATMs in town. Every time I stopped and tried to get money from them, they were all out of cash. I ended up driving up to Cobano one day and was able to get money from one of the ATMs there.
I had debated whether to use dollars or colones during the trip. The opinions on TA seem to vary on this issue, but I found that having both available was the best way to go. I paid for things like the fishing and Tortuga Island trip with dollars since this is how the prices were quoted. I paid for meals at restaurants and groceries with Colones since they were being charged in Colones. That way, you don't end up being charged a less than fair exchange rate.
We took several day trips as follows:
Fishing - went out with Joe Stueck (www.sportfishingmalpais.com) for a half-day trip and had a great time. Caught several mahi mahi , a nice cubera snapper, and a jack crevalle. We brought some of the mahi and the snapper back and made the best fish tacos I've ever had.
Montezuma - walked through the town, did some shopping, and had a nice lunch at El Sano Banano. Then hiked up the waterfalls which was really fun. We swam in the pool at the second waterfall, jumped off of the rocks next to the waterfall and even through the water from behind the waterfall.
Tortuga Island Trip - took this full day trip which left from Montezuma. It was about a 45 minute boat ride to the island. We snorkeled for the first hour or so and then had the lunch that was included in the package. The food wasn't great, but wasn't horrible either. We then rented a kayak and did some exploring. The snorkeling was the highlight of this trip for us. We found the rest of the trip to be a little too "touristy" for our taste. I thought the $50 per person price to be very reasonable compared to other activity prices.
Playa Hermosa - this is the next beach up from Santa Teresa and we went up there several times for surfing. This was a better spot for beginners to surf as the waves and water were calmer than the area around suck rock in ST.
Getting to Santa Teresa/Mal Pais by car was quite an experience. We got lucky and didn't have to wait long for the car ferry at either the Puntarenas or Paquera side. However, the paved road from Paquera to Cobano was loaded with big, deep potholes. You have to constantly swerve around the potholes in order to avoid puncturing a tire or suffering damage to the car. The dirt road from Cobano to Mal Pais/ST was actually better than the paved portion, although it was bumpy with lots of ruts and very dusty. The steepest part of the road has been redone recently and was in very good condition. I would highly recommend a 4x4 vehicle even in the dry season, primarily for the extra ground clearance. We did take a shortcut road over to Montezuma that involved a creek crossing and you probably wouldn't want to try that in a regular car either.
Overall, we really enjoyed our stay in Santa Teresa. The fantastic beach, good surfing conditions, and the lack of touristy, high-rise hotels and condos make this a great spot. The dusty road was somewhat of a nuisance, but I wouldn't let this deter you from visiting the area. In fact, I'm already looking forward to going back at some point in the future.