I'm just finishing up my undergrad at Davis and preparing to move on, but I've got to say...I'm going to miss the place.
If you plan to live anywhere within the city limits of Davis, you really don't need to own a car. As has been mentioned, Davis is an extremely bike friendly town, and it's not just the "hardcore cyclists" here who use a bike to commute every or almost every day to school/work. I live in North Davis at the moment (Temescal Apartments--I can vouch for the location and the management, if that's any use!), and I'm perfectly happy to bike the ~2 miles to campus each day. Any two points in Davis are no more than 15-20 minutes away by bike, and the student-run UNITRANS bus system is pretty comprehensive for a relatively small town, so it's extremely reasonable to forgo the expense of a car. Zipcar has also made a convenient appearance in Davis both on and off campus, so that's an additional option for short trips. Yolobus (which is free to students) is an option for travel from Davis to Sacramento, Woodland, or Sac Int. Airport, and generally runs every hour or so on weekdays and somewhat less frequently on weekends.
If you're willing to share an apartment, rents in Davis can be rather reasonable (by Northern California standards, in any case). Rents at my apartment complex (and I suspect at others as well, given the existence of the communally agreed-upon Davis Model Lease) have actually decreased this year after increasing monotonically each year for as long as anyone I've talked to can remember. You could probably get away with $450-650/month, assuming you want your own bedroom but are flexible regarding most of the other details of your living situation. The lower end of that range would probably entail splitting a 3/4 bedroom apartment with 3/4 people and living moderately far away from campus (still within biking distance, of course). The higher end of that range might allow you to rent a 1 bedroom apartment for yourself fairly far from campus or split a larger 2-bedroom closer to campus. Obviously, rents at some complexes, especially in West Davis and near campus/downtown, may run higher, but it you're persistent (especially in the current economic climate) I think the above rents are attainable.
Davis can indeed be a quiet place, which can be a good or bad thing depending on your preferences. For the record, I've never been bored here, but Amtrak is a great (if slightly expensive) way to get into downtown Sacramento or the Bay Area if you so desire.
I also second the suggestion that all those interested in Davis check out DavisWiki (http://daviswiki.org). This is a fantastic resource for all things Davis, and I will miss it dearly.