Bars

Hemingway's Cantina- Four blocks from the main square in La Crucecita on the corner of Palma Real and Gardenia is Hemingway's Cantina, which was formerly the Crucecita location of Ay Caray. It's still run by Alfredo, the same owner, with casual fare such as poppers, beef stew, arrachera tacos, and the like. They have live music a number of nights a week. They've left the beach location at Bahia Maguey to be the sole Ay Caray seafood restaurant, which has had the reputation as the best seafood restaurant in Huatulco.
Casa Mayor- Owned by Ricardo and Natalie, with roots in the organic coffee mountain area of Pluma Hidalgo where they own a finca, this upstairs restaurant/bar is one of the favorites of locals on the Crucecita Plaza. Most nights have live music with someone on guitar, and the open air ambiance overlooking the square is great. Check out their website for info on their ecological tours in the mountains around their El Pacifico finca. Though the website is in Spanish, Ricardo is fluent in English if you contact him through it.

La Crema- La Crema has an upstairs location on the NW corner of the main plaza in Crucecita, and has a comfy and funky blend of couches, easy chairs, and high chairs, along with colorful hangings and huge candles. Some of the best pizza in town, made in a wood-fired brick pizza oven. Atrociously slow times for turning out pizza when they're really busy, though. Most of the staff is fluent in English. Also has a cool store inside that sells the same kind of colorful things the place is decorated in.

Restaurants
There are more good restaurants than bad ones in La Crucecita, and it's really hard to go wrong anywhere around the main square. All up and down the side streets of Crucecita are simple places the locals patronize, from taco stands to full menu restaurants, and most of them tend to be very cheap and decent. Just look for a total absence of frills and plenty of customers and you'll know you're at a good spot. For other than standard Oaxacan cuisine, the restaurants singled out below are local classics.
Rigoletto - For great value on incredible Italian food, this hole in the wall restaurant always was a local favorite. Giordana made everything from scratch, and the place was perpetually busy even in the off-season. It's still busy and popular, but Giordana sold it. Some of the cooks are locals she trained and the food is still excellent, but it's not quite the same anymore without Giordana's presence. That said, it's still likely the best Italian restaurant in town. On Ocotillo between Bugambilia and Gardenia in La Crucecita. (958) 587 1246
Cafe Juanita- On the west side of the park in Santa Cruz, Canadian Jane Bauer and her husband Alfredo of Hemingway's Cantina run this small upstairs cafe that serves a variety of innovative dishes.
Viena- Located in Tangolunda across from Barcelo, Viena is run by a Mutt and Jeff looking pair of Austrians, the lanky Mannfred and the short Helmut. This is the place in Huatulco for high quality European cuisine. While pricier than most local establishments, it's still good value for excellent cuisine that can't be found anywhere else in town.
Terracotta- Housed in the elegant Mision de Los Arcos hotel on Calle Gardenia a half block off the main square in La Crucecita, Terracotta is a beautiful, air-conditioned restaurant with surprisingly reasonable prices. Service is pleasant and fast, there's a nice view through the huge glass window of the adjacent park, and the Oaxacan specialties are as good as they come. Also has an outdoor cafe with free wireless internet, and is a very popular breakfast spot.
Itoo- A new restaurant two blocks to the west of the park in Santa Cruz, this is quickly becoming a favorite breakfast spot in Santa Cruz, with enormous pancakes (don't order more than one unless you're hungry!) and a good lunch and dinner menu in an elegant setting.
Discos
If you want to go out dancing at night, be prepared to stay up late - real late. Like much of Latin America, discos only begin to get going at about one to two in the morning. There are three or four clubs in Chahue, within walking distance of each other, and they all charge ten dollar covers. Which is the best is usually a matter of musical taste, though the ambiance of each one is quite different from one another. Papaya is perennially popular, upstairs in an open air atmosphere. Behind one of the bars is a glass partition looking into a swimming pool, where underwater dancing girls frolic at certain times of night. The music never seems to change from night to night, so if you've experienced Papaya once you pretty much know you're going to get the same thing every time you go. It's a bizarre dated mix of reggaeton, Shakira, Shania Twain, Village People, and songs from Grease. One of the other downsides to Papaya is the lack of a proper dance floor - patrons are left to dance in the spaces between tables. La Mina ("The Mine") is an underground club in the basement of the Hotel Aligheri and favors much more of a house/techno blend of music. There's a proper dance floor at La Mina with lots of flashing lights and dry ice, and there are comfortable booths and tables. For singles looking to hook up with someone, the discos are the only good option in town because they're where everyone goes to party. On the other hand, if it's not a big holiday time with lots of people in from Mexico City and elsewhere, you can forget the singles scene.