The Fremont/Ballard neighborhood has always been our favorite of nook in Seattle. Situated next to the canals, it's got beautiful walking/biking trails (the Burke Gilman), excellent music venues / nightlife, and a wide variety of restaurants and boutiques. It's home of the Summer Solstice parade in June, Seattle's most popular street festival.
It's also just a hop skip and a jump away from downtown, with a bus stop directly across the street, and minimal traffic...making work commutes a breeze.