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You've gotten good suggestions so far. I would add that one of my favorite Seattle coffee places, Cafe Lladro, has a small shop at 1st & Union (around the corner on Union), just at the south end of the market area. Maybe not the coziest atmosphere for hanging out, but excellent coffee awaits!
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The shadow of Starbucks #1 looms over the market. When I'm in the market I usually go to Local Color (west side of Pike Place at Stewart St). It's not the best of Seattle but it's the best place in the market for java, IMO.
Zeitgeist, on Jackson St in Pioneer Square, is my favorite cafe in Seattle. If you're going that direction anyhow (for the underground tour, a baseball game, to Elliott Bay Books, or whatever), you should drop in. I'd rate it worth a walk down 1st anyhow.
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re: terrier
I second the rec for Local Color; downtown I also frequent the espresso bar at M. Coy Books (Pine Street bet. 1st and 2nd). (A long time ago, M. Coy was a partner at Bailey Coy Books on Broadway.) They serve Caffe Vita coffee and Macrina pastries, and have a few tables where you can sit and read a book or magazine. Plus you'll be supporting your independent bookseller.
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