I am enjoying the heck out of Oaxacan food. It is muy rico, as they say, which doesnt mean rich, but delicious.
I just got back from lunch at Casa Oaxaca near Santo Domingo. It was quite lovely and in a peaceful setting, in a courtyard with a small pool filled with floating blossoms...I had an amuse of a quesillo and herb stuffed squash flower, a salad of shredded piles of different vegetables (beets with walnuts, cucumber with lime, and apples and pineapple) with an orange pepper dressing, and a cream of avocado soup with melon balls and fresh cheese slices.
All very good, about $15 with a limonada.
My favorite cheap place is either any booth in town with a woman heating a big comal (terra cotta platter) over a firebox and making quesadillas of squash blossoms and cheese, or Loncheria Guajalote on Ave Reforma where you can get three tasty tacos for $2.
I also love Cafe de la Flor on Armenta y Lopez near C. Colon for its traditional Oaxacan food and quiet, serious waiters.
I ate at Cafe La Olla, where the avocado soup was quite good, and the spaghetti was...well...ok. I have heard most of their food is great. I will go back and try again.
Right across the street, Cafe La Antigua serves good local coffee, fresh roasted.
I would advise staying off the Zocalo because the swarms of vendors make eating there a wearying experience.
A block away on 20 de Noviembre is Mariscos el Red, which is properly famous for its huge seafood cocktails, or the tiny places along the street and in the market there, which serve a variety of treats from nieves de agua (sorbets in local flavors like mango, guayabana and lime-chile) to the famous Oaxacan chapulines (grashoppers, tiny ones).
It is hard to get a bad meal here, though I would skip the pizza, which just doesnt translate well.
No digestive problems so far, except for eating too many chiles. I have been taking large prophylactic doses of pepto bismol (2 tabs 4x daily) and have eaten and drank pretty much everything they tell you not to (drinks made by ladies in an open market served with ice, food from street vendors, fresh fruit of unkknown origin) with no ill effects.