We only spent 3 days in penang. The town is actually quite quaint and really worth a visit. It's one of few parts of Malaysia where the Chinese population is greater than the bamiputra (ethnic malay). It also has strong Indian influence. Unfortunately, what this means is that there's no social security or assistance for building new businesses. As a consequence, its actually appears poorer than other parts of Malaysia, with many many homeless people living on the streets. There's also a fair amount resentment to current government policy that actively promotes opportunities for ethnic malays. Most people work a six day week, and a good chef will earn $1200 RM for that, of which 25% goes on accommodation. Of course, there's no tax in this income bracket. Purchasing power is actually quite good, until you look at air travel, or western commodities.
The food in Penang is as we were told. One of the highlights was a McDonalds style Indian chain-store fast-food joint. Amazing food - we wish they'd open in NZ. (see the Roti Chani video on the malaysia home page). There's also great Chinese food - we were finally acquainted with wonton mee - wontons, noodles and pork in a vegetable broth - yumeee! Very easy to get to the train station - just get on the free ferry and it takes you straight there.
From butterworth, you can go straight to Bangkok (although you might now want to reconsider that). 2nd class is slight overkill - the seat spaces is at least 2-3X what you get in Malaysia, and the sleepers are really comfortable if the aircon doesn't freeze your pinkees first. The food's not bad either.
If you come overland, try the train. You might want to check on the security status in Hat Yai first though.