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The Best Place to Study Spanish is
Guanajuato, Guanajuato

The winner is Guanajuato

Guanajuato state's capital, this colonial city is vibrant and unusual. One of its principal thoroughfares runs underneath the city, which sprawls up the sides of a deep canyon. Tall, colorful, narrow houses overlooking narrow, twisty streets characterize the Old City. A university town, Guanajuato has a youthful population and many worthwhile museums.

A lively university town with great Spanish schools1

And the runners up are....

San Miguel de Allende, Guanajuato
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Several major Spanish schools

Guadalajara, Jalisco

Oaxaca, Oaxaca
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Several different language schools in town

Merida, Yucatan
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several major Spanish schools

Mexico City, Federal District (DF)
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Numerous institutions

Puebla, Puebla
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Morelia, Michoacan
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Study at the Uni of Michoacan or private CCL plus a few others

Ajijic, Jalisco
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No schools, but lots of people who teach Spanish everywhere.

San Cristobal de las Casas, Chiapas
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A popular place to study Spanish in a lovely, small town setting