A few of our favorite restaurants:

The Shed, 113 E Palace Ave, in a fun old adobe building near the plaza, make reservations (New Mexican food- great red chile)
La Choza, 905 Alarid St, owned by the same family as The Shed, it is preferred by most locals because it is away from the plaza, has fewer tourists, and is slightly less expensive (New Mexican)
Tomasita's, 500 S Guadalupe St, very popular, often busy with a wait (New Mexican)
Tia Sophia's, 210 W San Francisco St, right off the plaza, great "wet" breakfast burritos covered in chile sauce
Cowgirl, 319 S Guadalupe St, fun restaurant & bar, often live music, pool in corner room (BBQ and a mix of other things)
Cloud Cliff Bakery, 1805 2nd St, good breakfast with local food (mix of everything- not really New Mexican food)
Sage Bakehouse, 535 Cerrillos Rd, GREAT pastries, scones, bread (they supply a lot of the local restaurants and grocery stores with fresh bread), they also make sandwiches and have soup (bakery)
Harry's Roadhouse, 96 Old Las Vegas Hwy, a bit outside of town, a great mix of New Mexican and other food (mix)
La Fonda, 100 E San Francisco St, colorful restaurant inside the historic hotel off the plaza, usually has a great happy hour with good margaritas, sometimes has all-you-can-eat lunch buffet (New Mexican)
French Pastry Shop, 100 E San Francisco Street, also in the La Fonda, has pastries and wonderful French onion soup for lunch (French)
El Farol, 808 Canyon Rd, end of Canyon Road, good place to go after checking out art galleries, tapas, live music, flamenco shows (New Mexican & Spanish tapas)
The Tea House, 821 Canyon Rd, also on Canyon road near art galleries, full of tea from around the world, good tea lattes and salads/sandwiches
El Meson, 213 Washington Ave, great Spanish tapas
Coyote Cafe, 132 W Water St, great contemporary New Mexican, more expensive than restaurants above
Santa Cafe, 231 Washington Ave, contemporary food, again more expensive than others