This is by far the most comforting Thai dish I know, a warm and completely delicious soup that cooks up in next to no time.
Slice chicken thinly and set aside. Chop the chiles finely (remove the seeds for less heat), cut the lemongrass into 1/2-inch lengths, tear the lime leaves into pieces, and cut the galangal into 1/8 to 1/4 inch thick slices; set all of these aside.
Combine coconut milk and water in a large pot. Warm over medium heat, stirring, but do not allow to boil. (A little bubbling is okay, but a rolling boil will kill the flavour.) Add the chiles, lemongrass, lime leaves, and galangal and cook for 2 minutes, stirring once or twice. Add the chicken and mushrooms and cook for 3 minutes or until chicken is cooked through. (If you've sliced it thinly enough, it shouldn't take this long.) Add the fish sauce, soy sauce, and chili oil and cook for 1 minute. If desired, add chili paste to taste.
Serve immediately. Do not eat the lemongrass, lime leaves, or galangal, but they should be left in the soup even after serving to continue to add flavour.
Vegans may omit the chicken and substitute soy sauce for the fish sauce.
Lemongrass, Thai chiles, lime leaves, and galangal may be difficult to find if you don't have a half-decent Asian grocery nearby. If necessary, substitute 2 tablespoons of lemon juice for the lemongrass, 3-4 serrano chiles for the Thai chiles, 1 tablespoon of lime juice for the lime leaves, and 1 inch of ginger for the galangal.
If allergies or salt intake are a problem, replace the fish sauce with an equal amount of reduced-sodium soy sauce.