I travel to Chihuahua frequently (see response #1). Chihuahua, located as it is at the base of the Sierra Madre and just 3 1/2 hours south of Juarez, is on the drug trafficking route and there are plenty of narco-traficantes in the city. It isn't the most dangerous city in Mexico, but certainly not the safest either. You can walk around downtown without fear and the north side of town where the univeresity is located is pretty safe, but like any large city you have to be careful of your wallet and be sure you know where you are as there are definitely some pretty sketchy neighborhoods.
But it is a medium size industrial city with much more going on economically than drug trafficking. There are also a number of universities in the city which culturally balances out the heavy industry located there. The downtown is pretty nice with good restaurants and a freshly remodelled pedestrian plaza. There's a couple of lively, and safe, night spots up on Avenida Bolivar and Chihuahua's Festival Internacional in September attracts some world-class acts.
Cost-wise, Chihuahua is somewhat expensive by Mexican standards, but you should be able to find a house or apartment to rent in a decent neighborhood for $500 usd/month, more or less. The north side of the city has been developing with gated communities and new apartments going in and the older neighborhood off of 20 de Noviembre around the Pancho Villa museum is pretty decent (where my sister-in-law lives).
Chihuahua isn't everyone's cup of tea - it's loud and dirty, hot in the summer, cold in the winter, with no major tourist attractions (althought he governor's palace and adjacent cathedral are pretty cool). You don't see many tourists or gringos around, but you do see some (the eastern terminus of the Copper Canyon railway is there). English is pretty widely spoken in Chihuahua, but not by everyone and you'll meet plenty of people that don't speak English.
Over the years I've come to like the place - but I don't think I'd retire there.