I've been giving this a lot of thought. Ragana's Magic Shadow Castle is quite sublime, as is the accompanying Queen Dragon's Rescue. I'm really partial to some of this year's sets already; Noctura's Tower & The Song of the Wind Dragon are both excellent sets w/ creative builds and fun features (plus, they have the most stunning Elves to date: Noctura and Lumia).
Overall, however, I think I have to give my top vote to the Magic Rescue From the Goblin Village. That set really has a lot going for it, for me. It actually feels like a village. The houses are different but retain the same style. There are lots of great, fun play features. Great selection of figures. I mean, really, you could just get this one set and have quite an adventure. Plus, at the time, I bought this at full price and it was the most I'd paid for an Elves set (I got both of Ragana's sets very nicely discounted at Wal-Mart). Having said that, I feel it's more than worth it. 2 weeks ago, I found a new set on eBay for $30 USD, shipped and I won, so now I have 2. I haven't opened the new set yet, but someday, I'd like to use it to expand the village out.