Khao San Road, beybeh!
It has everything one would expect from a real happenin' beach place -- henna stalls, curio shops, places where you can have dreadlocks braided into your hair, cheap food, cool beer, white people in skimpy beachwear walking the main road, stalls giving massages, bargain books, tie-dyed shirts and sundry...
Yups... one can find everything at Khao San Road... everything except the beach, of course.
:-)