El Mason de pepe had great food, as did El Siboney. Blue Heaven had pretty decent island food, as well.
As for cigars, the best place I had some from was from the Key West Cigar Club. Got a couple house blends that were quite good (lancero and #2 torp size).
And if you're a chilihead, you HAVE to stop in to Peppers of Key West. AWESOME selection of hot sauces there!
It is worth noting that it was ~4.5 years ago that I was down there, but it was memorable.