[jasonlbaptiste]

check out http://www.pegasusnews.com/

Their founder really gets it and they're doing well. (Acquired already too, with the founding team still committed to success).

[dbul]

Man, these neighborhood things are all over the place:

http://southorange.patch.com/

[fallentimes]

This one has been very successful:

http://www.baristanet.com/

[brandnewlow]

Also:

http://westseattleblog.com (pulling in over $10,000/month off caveman simple display ads) http://uptownupdate.com (best neighborhood blog in Chicago, all writers are anonymous, they cover a rough, controversial neighborhood and overlook nothing) http://lakeeffectnews.com (laid off Chicago journo started her own site, bringing along the laid off ad sales person from her last gig)

I could rattle dozens more of these.