There is a great restaurant outside of Colmar in a small town called Guewenheim that is an absolute local favorite. The name of the place is Restaurant de la Gare.
The food is somewhat high-end and "gastronomique", but there are many traditional aspects to it. They serve choucroute-garnie for example. The wine list is incredible, and the service is extremely warm and welcoming. I highly recommend it.
2, RUE DE SOPPE
I agree, Auberge de L'ille is a good experience. My wife and I ate there in 2004, and while we thought it was not on par with La Cote d'Or in Saulieu, anotyher michelin 3 star, it was very good. I especially remember the squab stuffed with foie gras and black truffles which tasted like refined wilderness on a plate. Very intense, gamy and rich. Expect to shell out a lot of money though.
While Colmar is certainly a wonderful place to visit, try to take a trip up and down the Route des Vins, if possible. You will be able to taste wines at the source and try local, but not necessarily touristy, cuisine. Here is a link: http://www.alsace-route-des-vins.com/
In Turckheim you can taste some of the best local wines, have a great lunch in restaurant De La Tour right outside the entry tower to the old town AND visit factory outlet store of Staub - famous maker of pots and pans. Nearby Wettolsheim boasts several wine makers named Buecher, all somewhat related, but not connected businesswise - I am familiar and highly recommend Paul or Barmes Buecher wineries. Going up toward Col de La Schlucht/Epinal and Vosges mountains you will encounter little town of Wihr-Au-Val. La Nouvelle Auberge there is probably the best restaurant in the whole valley of Munster. Quite reasonably priced and tilting toward tastes of Burgundy, which is a welcome change after all that choucroute and tartes flambees. It is immensely popular with the locals and reservations are hard to get. Schoenheitz in Wihr-Au-Val is the last winery, going that direction, but also worth visiting. If you keep going up the road, you will encounter Munster and its numerous nearby farms and farm auberges, that make you know what :) Some of them have simple but absolutely fantastic food. In the town of Munster you will find a great restaurant L'Agneau D'Or. The food is Alsatian, but prepared and presented with much greater sophistication that the prices would suggest.
In Colmar itself there are a lot of nice and affordable brasseries, like Schwendi, or winstub Brenner. I would stand in front of some bank or store at 11:59 and watch the employees as they close the business for lunch. Follow them and you will most likely end up in a great local eatery. I am serious...
I agree with the Auberge de l'Ill recommendation. It is really great. Lunch with a few glasses of wine will probably cost you 160-170e per person and is well worth it.
If you are willing ot drive a little further north, le Cerf in Marlenheim is very good too. It is a 2 star now but has held at least one star in the Red Guide continuously since 1937. Here is a link: http://www.lecerf.com
A little further north in Lembach is a truly fabulous 2 star, Auberge du Cheval Blanc, http://www.au-cheval-blanc.fr It is out in the country and highly enjoyable.
Also in the same general area is a 3 star l'Arnsbourg http://www.arnsbourg.com The cooking there is very inventive & modern but clearly with an Alsatian influence. You will be astounded by some of the things that come out of the kitchen. If you go, print the driving directions from http://www.viamichelin.com and keep them handy. It is at the end of winding road deep in the forest.
Le Cygne in Gundershoffen (2stars) is also extremely good. http://www.aucygne.fr
Except for Auberge de l'Ill, none of these are in the immediate area of Colmar but are well worth the hour or so drive it would take to get to them.
Au Fer Rouge closed a year ago.
JY's is like a very high end brasserie, and has one star. They have an enormous list of wines by the glass or 20cl portion. It's a very enjoyable place to eat, but if you don't smoke, be very insistent about being seated upstairs in the nonsmoking area.
Rendez-vous de Chasse, in the Best Western across from the Colmar train station is very reliable and serves consistent and traditionally prepared food. I think it represents less value for money than does JY's, however.