1. Key West is small so finding something off the beaten path is nearly impossible.
2. Very few bars in Key West are fancy, most all of them could qualify as a dive.
Taking in these two considerations, I have to designate the best bar in Key West as being one in the touristy area, but it does stand out. The best dive bar in Key West is:
Captain Tony's is in a dank, dark place with tons of business cards and flyers stapled everywhere you look. There is even a tree growing through the roof. Despite it's dark surroundings, it attracts locals and tourists alike. It is the bar Hemmingway drank in and the bar Captain Tony, a local legend in his own right, owned. Captain Tony passed away recently and will be missed by all. If you get a chance, stop by and pay your respects, tip a glass to Tony.
For more information on Captain Tony's visit the website and while you are at it, read Tony's story, it is very interesting: http://www.capttonyssaloon.com/
(B) back and is never crowded as far as we could tell. It’s a nice break.
Just off of Caroline St. (C) Schooner Warf a block or so from Caroline is indescribable, but generally has some good outside music. (E) Turtle Kraals is really touristy, but rarely packed. They have turtle races on Mon and Fri at 6pm. SO CUTE! Across from there is Dante’s, sit at the pool side bar if you can. Note: This is a bar/restaurant with a pool. There is no hotel there so anyone can use the pool.
Just down from these places is (G) Finnegan’s Wake. I loved this place! Their happy hour is great and they have two of them. Normal one and one from 12-2am. Cheap wings here as well, but they are not breaded (more like buffalo’s wings).
Ialso recommend this place on the other end of the island: http://southernmostbeachcafe.com/documents/lunch-SMBC2011.pdf Try the mango bbq, it’s to die for. Also you can grab two beach chairs and enjoy drinks right from the bar. The chairs are $5 a piece and you get free frozen towels, and chili willies from the guy who is in charge. Pretty cool.
The Green Parrot has Open Mic Sunday with great Jazz (these guys can play! A must see!!). The Monkey Bar (gay bar on the corner of Simonton and Olivia) has Karaoke on Friday nights. Much cooler place than Two Friends Karaoke.