"Fall Creek is the best area to live as a grad/young professional, IMHO. It's near a campus shuttle that runs once every ten minutes during the week, the apartments tend to be nicer and cheaper, it's closer to the few good bars, the houses are charming, and there are nice antique stores and coffee shops in the area. Downtown has a little pedestrian mall, with restaurants and several festivals throughout the year.
AVOID Collegetown (undergrad ghetto south of campus), with the possible exception of State Street or below Stewart Ave. North is ok, but the bus service isn't really as helpful as landlords would have you think, although it's improved quite a bit since I've been here. Cayuga Heights would be a nightmare for getting to/from campus in the snow - mostly downhill from campus, no real bus service."
^^
Greetings
Just left Ithaca last May after the better part of 8 happy years there. While Fall Creek is definitely populated by a lot of graduate students, I would give lower and upper Collegetown a fair shot, too. Not saying it's better, just saying you should check it out. It really depends on what stage you're at in your life, and what sort of atmosphere you want to be in. The Commmons, the pedestrian mall the poster above referred to, is a nice place to walk around in theory -- and, often enough, in practice -- but there is a large vagrant contingent that you're likely to see dominating the place a lot of the time. Downtown Ithaca generally is nice enough, but be aware that a sort of seedy, hippies-gone-bad contingent definitely DOES exist and you may feel safer in or right around Collegetown than downtown, if you wind up living in Fall Creek and walking to the Commons a great deal. I don't say this to unfairly represent Ithaca or scare you -- it's definitely a safe place overall, but, like anywhere else, it does have its rough spots. Just be aware of this and scope out not just the block you're looking to live on but also the area around it, especially if you don't have a car or just like to walk a lot. When I say upper collegetown, I'm talking up Dryden Ave., "above" College Ave. and Linden Ave. There are some nice, quiet places up there and you can make an argument, depending on where you're going on campus, that this is actually the most convenient place to live around, because there's an entrance to campus near the baseball field (also up in that direction) that many people seem to forget about.
You're right to presume that north campus could be a very bad move. It's very isolated, and depending on where you live, you might be looking at a 45 minute walk if you want to head to Collegetown for a cup of coffee or to meet friends. I would definitely avoid this (I agree with red_crayons re: Cayuga Heights; don't even think about it unless you have children and want a solidly home-based lifestyle). Red_crayons is also spot-on in saying that housing is a bit pricey, but I would say that decent housing is there for the taking as long as you do your homework. Yes, there are shabby places, and yes, most of the houses and apartments are going to have a bit of the look of a place that's been rented out to college students for years and years, but most places aren't too shocking and, well, you get what you pay for, ultimately. During the 2008-2009 school year, I lived in a spacious two-bedroom apartment, about a fifteen-minute walk from campus (lower Collegetown, below Stewart Ave.; Sage Place, to be exact) for about $625/month ($1250/month between the two of us), all things considered. For a decent two-bedroom place, this is on the cheaper end of things, unless you get a place outside of town or something like that.
Anyway, I could go on and on; I started at Cornell at age 17, took a few years off, some of which I spent in Ithaca, and graduated last May at age 24. I was around the town for a long time and was living a sort of borderline-grad student lifestyle by the time I left. By this I mean that I lived with a Ph.D. student and had tons of grad student friends -- not to mention friends who were native Ithacans -- but, obviously, also had a lot of connections with undergrads. This may seem hokey, but in my opinion, the best thing one can do to make living in Ithaca enjoyable is to, well, meet people. You'll want friends to go to the gorges with, friends to go out with, friends to watch a movie with when there's a blizzard outside.
I could go on and on. Ithaca is a beautiful town, and Cornell is an amazing school. I will always miss it, and I will never lose touch with the faculty and friends I met there. There are plenty of places to eat, plenty of nice bars, plenty of nice coffee shops...it really is a high-functioning college town. If anyone has any questions, please contact me!
All the best