I vote for the drive. There are a ton of things to do.
Here is my guide to the Keys:

Keys Information
Virtual Tour of the Keys and Key West: http://360floridakeys.com/ - See the sights along the way.

Flying:
Flights into Key West are typically far more expensive than flying into Miami or Fort Lauderdale. The drive from Miami is about 3.5 hours and 4 from Fort Lauderdale. It is a very scenic drive.
Since the runway is so short at Key West, there are typically baggage & weight restrictions that may or may not impact you. Each airline differs slightly. Check before you ticket.
From Delta’s web site: NOTE: All passengers traveling to or from Key West, Florida are limited to one checked bag. This supersedes all exceptions.

Cruise ships now grace Key West. You may want to avoid the times that they are there. They tend to stick to Duval Street or the most touristy things. Check timing here: http://www.keywestcity.com/departmen...asp?fDD=13-192

Places to stay:
Sunset Key – Small man made island just off Key West’s Mallory Square. Very nice. Boat shuttles run often. Attached to the Westin Resort. http://www.starwoodhotels.com/westin...ropertyID=1781

Marriott Resort – http://www.beachsidekeywest.com/ On the side of the island away from the heart of the city, so you would have to shuttle/taxi to and from the hotel. New property, my wife stayed here and loved it.

Simonton Court Inn and Cottages - http://www.simontoncourt.com/ - Private bungalows, some have private small pools. Cool place. Also have an Inn. Centrally located to all the fun.

La Concha - http://www.laconchakeywest.com/ - Crown Plaza, right on Duval St, in the heart of Old Key West. Roof top bar if I remember correctly.

Westin Resort - http://www.starwoodhotels.com/westin...language=en_US – Right next to Mallory Square. We ended up with a room on the first floor that was kinda dumpy and staff wasn’t the friendliest in the world, but the location is great.

Double Tree Resort - http://doubletree1.hilton.com/en_US/...orida/index.do
Not near Old Town, so you have to take shuttle, taxi. Have not stayed there, so no idea about it.

Bed & breakfasts:
The Artist House - http://www.artisthousekeywest.com/ - Most recommended in Key West.

Little Palm Island - http://www.littlepalmisland.com/ - Further away from Key West, more of a get away.


Places to eat:
Local fare to try includes Fish Dip (Smoked fish & spices), Conch Chowder (spicy tomato based soup), Conch Fritters, Stone Crab Claws(dip in Remoulade Sauce) , Key Lime Pie.

Pepe’s - http://www.pepescafe.net/ Locals place, though getting more popular with the tourists. Great place for breakfast.

Blue Heaven - http://www.blueheavenkw.com/ http://blueheavenkw.homestead.com/Bl..._Key_West.html
I think they close for the summer, re-open October 16th. Check with them. Good breakfast. Live music, outdoor dining. Will be a wait. Never eaten dinner there though.

Kelly’s Caribbean - http://www.kellyskeywest.com/ - A block off Duval, very nice garden setting. Original building of PanAm Airlines. Originally started by Kelly McGillis of Top Gun fame. Evidently she lost the restaurant in a divorce.

Kermit’s Key Lime Shoppe – The place to get Key Lime pie. All sorts of delicious treats. http://www.keylimeshop.com/

Columbian Grace - http://www.facebook.com/ColombianGrace - http://www.colombiangrace.com/About_...ian_Grace.html - I have not eaten there, but others have recommended it. Good place if Blue Heaven is closed or long lines, as it is just steps away.

El Meson de Pepe - http://www.elmesondepepe.com/ - Next to Mallory Square. Good Mojitos but not cheap. Good Cuban food.

Places to drink:
Green Parrot - http://www.greenparrot.com/ - Best locals bar. Good live music, great jukebox.
Schooner Wharf - http://www.schoonerwharf.com/ - Throw back to old time Key West. Water front.
Captain Tony’s – Oldest bar in Key West, home of the Hanging Tree. Usually have music.

Turtle Kraals - http://www.kwflausa.com/key-west-listing-7332.html - Relaxing place with nice view and historical, as it is where the turtle pens (called kraals) were during the days when they were commercially harvested. If you are in the area and want a drink or snack, worth a stop.


Touristy places, but almost a requirement:
Sloppy Joe’s – Hemmingway’s hangout.
Margaritaville – Live music, decent food.
Hog’s Breath – http://www.hogsbreath.com/ - Better than no breath at all.




Things to do:
Calendar of Events: http://www.keywesttravelguide.com/calendar.html
Key West Guide - http://www.kwflausa.com/

Sunset at Mallory Square – Get there an hour or two beforehand for the various street entertainers. Good food and drinks at El Meson De Pepe right in front of Mallory Square. They usually have a band around sunset.

Historical:
Mel Fischer’s Treasure Museum – The amount of treasure in there is stunning.
Hemingway House –
Southernmost Point
Key West Cemetery – Like New Orleans, interesting head stones. My favorite is “See, I told you I was sick.”
Fort Zachary Taylor - http://www.fortzacharytaylor.com/home.html
Fort Jefferson - http://www.fortjefferson.com/home.htm - Dry Tortugas, a nice day trip or half day trip.

Land
Trolley or Conch Train – Good way to get around the island and see it all. One of them has a 2 day pass, but forget which one.
http://www.trolleytours.com/key-west/
http://www.conchtourtrain.com/index.htm
Haunted Key West walking tours –
Rent a scooter (note, they do bust people for DUI on the scooters.)

Water
Snorkeling trips – there is one that is a catamaran that is pretty interesting, but there are a multitude of them.
Jet Ski tours –
Sunset cruises –
Ecotours –

Shopping:
Fast Buck Freddie’s – http://www.fastbuckfreddies.com/ - A Key West tradition. You have to stop in, right on Duval Street.
Sandal shopping – Kino’s sandals - http://www.kinosandalfactory.com/
Beaches:
Smather’s Beach – one of the only beaches in Key West.
South Beach – at the end of Duval St. near the Southernmost Point. I like it because there is a bar/restaurant right there on the beach.

On the way from North to South:

If you drive, there are two ways to get into the keys at Key Largo, US1 or Card Sound Key. US1 is shorter, but more heavily travelled, so could be slower as it is a two lane road. The drive through the keys has some amazing views, including the 7 mile bridge. They typically use Mile Markers (MM) for directions rather than addresses.

Card Sound – Alabama Jack’s - http://www.alabamajacks.com/ - A traditional stop along the way if you opt to take Card Sound route. A bit more touristy these days, but started out as a biker bar. On a bit of water, good local food.

MM ? – Swim with the Dolphins: http://www.dolphinworld.org/

MM 102.5 - Pennekamp State Park - http://www.pennekamppark.com/ - Great snorkeling to barrier reefs.

MM 84.5 - http://www.theaterofthesea.com/ - Theater of the Sea – You can swim with the dolphins here and they have a very small version of Sea World

MM 84 – Holiday Isle - http://www.holidayisle.com/bars-and-restaurants.htm - Tiki bar is a nice place for a drink. They also have a marina that provides snorkeling, jet skis, etc.

MM 82 - Lorelei’s - http://keysdining.com/lorelei/ - Great view, good seafood. Sit and have a Bushwacker overlooking Florida Bay, sitting on the beach. Try the Conch Chowder, Fish Dip, or Conch Fritters.

MM 77.5 - Robbie’s Marina/Restaurant - Funky little collection of things. Waterfront dining, feed large tarpon, kayak to nearby islands, little shops. Worth a stop. http://www.robbies.com/tarpon.htm

MM 47 Pigeon Key - http://www.pigeonkey.net/home.html - Middle of the old 7 mile bridge. Finishing point of the last Amazing Race.

MM 37 - Bahia Honda State Park – http://www.bahiahondapark.com/ - Nice little beach, view of railroad bridge.

MM 29 - Big Pine Key:
Key Deer State Park: http://www.fws.gov/nationalkeydeer/ - Home of the endangered Key Deer. They are a small version of deer. Do not speed through this area, especially at night, you will be ticketed. Lots of warning signs up.
No Name Pub - Big Pine Key - http://www.nonamepub.com/history.html - Historic Pub, very casual dining. Not directly on US1, but about 1.5 miles away. Cool place to stop for a drink/food.