I have to say Penang but I'm biased because it's my hometown.
It really depends on what you are looking for. Phuket is quite built up though there are lovely resorts around. My last trip there was in 1988.
Penang still has a colonial sort of old world charm to it and Malaysia has a lot to offer. The local currency is low and you can stretch your dollars far here. Food is very cheap and even the hotels (which one are you staying?) have good and very reasonably priced foods.
If you are still game on Phuket - remember that April 9 for 1 week is the Thai New Year and most of the island is booked out already.
[This message has been edited by Celestar340 (edited 03-26-99).]