Taxco is a small town in the state of Guerrero, in Mexico. It is built on a mountain, and it is easily reached from Mexico City - there is a nice new carretera, and the bus from Taxqueña takes around three hours.
Taxco started out as a mining camp called Tetelcingo, and it developed nicely. A Spanish immigrant called Don José de la Borda impulsed the architectonical growth of the city, notably causing the church of Santa Prisca to be built.
Nowadays, the mines exhausted, it has turned into a silverworking and tourist center. People come here to buy the silver, and to see the Holy Week festivities that include people carrying hundred-pound bundles of spiny blackberry branches, women rattling chains and some impressive processions.
Taxco is a town of narrow, steep streets, where people having a stroll coexist with very fast white VW bug taxis, very fast combis and very wide SUVs. Suffice it to say that you have to be alert, if you like your limbs.
This having been said, it is nice town for walking around, or rather up and down in the streets. Due to the turist presence, there are bars open until at least 2 AM. I also had the impression that there was a large amount of gay people walking around, but maybe they were simply being open about it (in the rest of Mexico, gays usually are very discrete about their preference).
Logistics
The hotel Los Arcos, very close to the Zocalo and Santa Prisca is very nice, with a curious architecture, a large tree taking up most of the courtyard, clean rooms and a pleasant terrace. And it is cheap: about 30 USD for a room for two.
I have not found a good place for breakfast, but I can certainly reccomend one for dinner: Tia Calla, in the Zocalo. Quite well hidden (practically in a cellar), you can locate it by standing in the Zocal in front of the church and walking to your left. It is not the place on the corner. If in doubt, ask a policeman.