Montage Laguna Beach might be the best hotel in the world.

And I haven't actually stayed at the Surf and Sand Resort, but it's a great spot for a meal over the waves & sand. 

Cafe Zoolu is my favorite local spot. Have to seat at the bar so you can watch the owner work in the kitchen.

The art festival is on in Laguna at the moment. Big crowds, parking is difficult. If you aren't going to the art festival drive further south and visit San Clemente. Great surfing at Trestles. San Clemente is fun just to walk around, explore the pier and all of the local beaches.

I agree with Brew: Montage Laguna Beach might well be the best hotel in the world! We've stayed there twice and would like to move right in! 

Check out Kimpton Shorebreak Hotel. In general, you just can't beat a Kimpton in great quality and price. When the budget doesn't afford a Montage-type choice (in any city), I check Kimpton first! Never disappointed.

Whale watching is a must, depending on the time of year, Grey whales, Blue whales and Humpbacks are often spotted. You actually take it out of Dana Pointanother beautiful city not far from Laguna Beach. I like Captain Dave's Dolphin & Whale Watching Safari (Captain Dave's Dolphin Safari).