We JUST got back from Cozumel. We stayed at the Park Royal and had a great time. The resort is 3.5 stars, but we stayed at a resort in Puerto Vallarta two years ago that was 4 stars, and the Park Royal topped it by a mile.
We did not at any time feel unsafe on the island. That being said, in a way we consider ourselves lucky. We had assumed that all the drug-related violence was still concentrated around the border towns, but that's just not true any more. Here are two stories, from June and November of last year, that tell about drug cartel-related murders occurring near Acapulco and Cancun:
http://www.csmonitor.com/World/Americas/2010/0608/Mexico-...
http://www.bbc.co.uk/news/world-latin-america-11705372
We have decided we probably won't go back to Mexico until their war on the drug lords is over. If you do decide to go, I would definitely recommend Cozumel over Cancun, for safety reasons. If you are intent on staying in Cancun, then be very careful about traveling anywhere outside of the resort, even on public transportation--one of the stories I enclosed tells of some tourists whose bus was taken hostage.
Definitely check out the American Embassy, Mexico web page before you go, to get any recent updates and advisories.