I am thinking of going to Oaxaca in May next year to check out craft villages and maybe get some beach time in in Huatelco. Anyone have any favorite villages they recommend and I welcome suggestions as to whether I should take in Oaxaca proper and just take buses to the diff villages as opposed to staying in diff villages.

Villages are easy enough to get to, not far from town and I think staying in Oaxaca Centro, or on the edge like Xochimilco or San Felipe would be more interesting.

However, my biggest suggestion would be to not go at the hottest time of year. It was hot when I was there last in February and goes up from there. A resident friend was complaining about the heat in March so... well, you get the drift. The season is "the season" (winter) for a reason.

You might find something here, a series on my last visit, including a couple of craft villages and some markets:

http://www.travelgumbo.com/blog/back-to-oaxaca

I love Oaxaco and would recommend spending time there before moving on.