Ah, I forgot about camping conversations. People that only camp on overland map miss out on a lot of very awesome VOICED interactions.
I barely rest at all. I've built up a party that's very strong on healing, and with two people who can cast "Calming Touch" (Community Domain) to remove fatigue. I got a little jittery over the quest timers, and so far not a single one has run out as I push my party to the limit (not even the hidden ones). There's no space for "fun and games" in this party! Either you're hardcore or you get dropped.
So yeah, most of my resting is done in the capitol, because it takes the least amount of time and also removes death's door etc.
Edit: Let me put that into perspective. Even if you keep removing fatigue, they will eventually reach a point where they just waddle around, despite only carrying a light amount, and a whooping -6 to Strength which can't be removed with spells (it's not even a debuff, it's just "there").
At this point, you'd think resting would be in order, right? Wrong! That's when you whip out Mass Bull's Strength and Haste so your party can waddle a bit faster. Waddle, I say! *Whip!* *Whip!* Keep waddling! *Whip!* *Whip!* Waddle faster!