Actually, August during Obon is an excellent time! It's hot and humid, but Obon is probably the biggest national festival time of the year. You'd absolutely need to see the Daimonji fires in Kyoto and possibly the Festival of Light at the Todai-ji temple in Nara.
It's a really festive time of year, transportation is totally packed, and everything is wacky. :) Everyone is off work except for the service industries.
Taking the longish trip and seeing Ritsurin-koen would be high on the list at any time of year except for the rainy season. God that park is beautiful. Japan's food is all regional, so the area of Takamatsu where Ritsurin-koen is located has the best Udon noodles in all of Japan. They are really different :)