you can do both....most visitors go to Nikko to see the Toshogu Shrine...you can visit the shrines and temples and also half time to visit the waterfall and the lake which is about a 20mins bus ride away from the Shrine area? and I've heard they have a pine forest near the JR Station as well..might wanna check that out when you are there....
from my previous experience, train services for the rapid express at the JR Station at Nikko ends pretty early when I was there a couple of years back..might wanna check the return train schedule outwhen you r there...