The home side appeared on track for an inaugural title in the abbreviated form of the game in the 10th and final national tournament to be held in the resort.
The script was spoiled by Taranaki, which scored three tries to one to beat Otago 17-7 in the semifinal.
Once, Otago rugby would have been more than satisfied with a top-four placing in the national sevens, especially a year after it appeared in the final.
But coach Roy Hawker and his players were desperate to go all the way and sign off from Queenstown in style before the tournament moves to Rotorua.
''We're disappointed. We came here to win this tournament to thank all the people up here who have done such a great job,'' Hawker said last night.
''It's going to be tougher from now on. Having our home crowd has made a big difference for us.''
Otago did not have the biggest side in Queenstown, and it certainly did not have the most pace.
Hawker was missing his two fastest players by yesterday. Highlanders training squad member Tony Ensor was not released, and flying youngster Liam Edwards suffered a fractured humerus and a dislocated elbow against North Harbour on Saturday.
''That was tough for us. But we showed a lot of guts. We had a group of guys prepared to work really hard. I think that's been the key over the last couple of years.
''That's what Otago rugby is about - honest performers, guys working for one another, pushing themselves to the limit.''
Otago's star performer was Brad Weber, who must tire of being described as ''diminutive'' but whose contribution over the weekend was massive.
The playmaker was in dazzling form right from the opening game, sidestepping defenders with ease and showing both his scorching pace and his vision.
''He's something special, isn't he? As long as he's in Otago, they'll always have a strong sevens team,'' Hawker said.
''Brad is just a wonderful playmaker. Pound for pound, he's also probably the gutsiest sevens player in the world.
''There were some superb performances by our boys right through. I hope they get recognised for higher honours.''
ITM Cup flankers Paul Grant and Gareth Evans had their moments, Peter Breen and Kieran Moffat chipped in with some key plays, and MattFaddes showed his acceleration and eye for the gap.
Otago was unbeaten on Saturday, thumping Wairarapa-Bush 49-0, beating North Harbour 19-12 and conceding a late try to draw 19-19 with Hawkes Bay.
It then produced a marvellous second-half effort to beat Wellington 21-7 and progress to the top four.
Hawker said Otago, wary of Taranaki's defensive pattern, believed it could win the semifinal if the players avoiding going into contact situations on their own.
''Unfortunately, we did that too many times. We drifted away from our game plan. And we possibly copped a couple of frustrating calls, as well.''