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I live near Peekskill and I am a big booster. The Peekskill Coffee House is my favorite in Westchester, the Paramount Theater is amazing, there are many great restaurants and galleries, and the riverfront park is one of the prettiest places around. There is a hip, artsy, urban vibe which I miss (sometimes) since moving from Brooklyn, and the housing stock is one of the best around--there are hundred of wonderful old homes in pretty good shape (which cannot be said for most of the surrounding areas, certainly not Mahopac). If you are looking for a vibrant, in-town experience, Peekskill is a great deal. RE values have actually increased a lot in the last few years, although they are falling now.
The big con is schools--it is a city and it has all of the school issues that come with an economically diverse population. So you won't get the type of school experience you will in neighboring districts. Peekskill is currently investing tens of millions on its schools, including a the construction of a new middle school building. But schools are the 'issue' that has kept the city from taking off.
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