You'll get tons of recs for food but I always like to mention the Schooner Wharf Bar for entertainment. Just go down Elizabeth or William from Caroline Street toward the water. It's usually the best rock and roll on the key; tons of fun for a group. (I love it and I'm an old geezer). If there's a musician in the group, go up (NE) Caroline from BO's and visit the used musical instrument shop. There's some cool used guitars (Gibson, Gretch, etc.) and other stuff. Occasionally there's a professional trying out some of the wares and can be quite entertaining. Other times it's closed for no apparent reason!
Seven Fish (reservations are a must), Nine One Five, Half Shell Raw Bar, B.O.'s, Pepe's Camille's, Sarabeth's.
632 Olivia St, Key West, FL 33040
Half Shell Raw Bar
231 Margaret St, Key West, FL 33040
Nine One Five
915 Duval St, Key West, FL 33040
530 Simonton St, Key West, FL 33040