Do read the state dept. warning - those guys are usually on the paranoid end of the scale and tell you not to go anywhere there might even be a hint of trouble. But even they say the problem is mainly in the north as I mentioned above - From their website:
"Much of the country’s narcotics-related violence has occurred in the northern border region. For example, since 2006, three times as many people have been murdered in Ciudad Juarez, in the state of Chihuahua, across from El Paso, Texas, than in any other city in Mexico. More than half of all Americans killed in Mexico in FY 2009 whose deaths were reported to the U.S. Embassy were killed in the border cities of Ciudad Juarez and Tijuana."
Since 2006, large firefights have taken place in towns and cities in many parts of Mexico, often in broad daylight on streets and other public venues. Such firefights have occurred mostly in northern Mexico, including Ciudad Juarez, Tijuana, Chihuahua City, Nogales, Nuevo Laredo, Piedras Negras, Reynosa, Matamoros and Monterrey. etc etc."
So, if you are going to vacation in Mexico, head south - I did and loved it. It is literally a thousand miles away from where the problems are. Again, I wouldnt condemn a whole country because of one region. But then again, I love Mexico, having lived there when I was little.
On the other hand, there ARE quite a few other warm places to visit so why not go where you are comfortable? Life is too short to spend it being nervous.