I heard about Pai for a long time and I just had a chance to travel to Pai during October 17 - 19 2009. I can tell you that it's very very beautiful. You can smell nature and still be comfortable there.
I stayed at the Pai Viman Resort. I think it's one of places where you can see the mountains & river and it's near Pai town. So you can walk to the night market anytime.