This hot spring is in a remote area of Datong 大同 township not far from Road 7. If you happen to be passing by on the way to or from other attractions, it's worth the detour.
The setup here is a bit different from most hot springs. Most of the rooms are little huts with a tub big enough for one person, so you bathe in private. A regular room only costs NT 200, which is a real bargain. There are also deluxe rooms equipped with a jacuzzi which cost 500-600 NT, but I don't think this is necessary. The facilities are simple but spotlessly clean.
The water here is totally different from the famous calcium carbonate hot springs down in Jiaoxi - in fact it's quite different from all the other hot springs I've ever been to in Taiwan. Here the water has a noticeable sulfur smell and some natural chemical in it stung my eyes slightly (don't worry - stinging eyes are part of the fun). The water is also slightly murky, as it contains some ultra-fine volcanic ash in suspension, giving it an odd slippery feeling.
They also serve food here, and rent out campsites for people to pitch their tents. If you want to camp along Road 7, this is the place.
To get here, drive west on Road 7 from Yilan City. After a little more than half an hour, you will come to the second bridge over the river. This is the Douniu Bridge 鬥牛橋, which also has a sign marking the way to the town of Douniu. Turn left, cross the river, and keep going. This road is called 7 Bing (7 丙). After about five minutes you will see a big hot pink sign on the right marking the hot spring. (If you get to the next bridge, you've gone too far.)