Best Knytt Stories levels (fan-made)
Don't Eat the Mushroom: I agree with erf_, it's very *something*. As in "what the heck..?"
Weird: another nonsense level, but fun.

Some nice environment themed levels
A Walk at Night: a night stroll through the city.
Rain: name says it all.
A Walk in Sad: a lovely little quiet level.
Night at the Arboretum: not much to do, but pretty.
(Gaia note: It's nicely polished, but after a while I got bored. Play another level.)

Dark Sky of Wish Mountain: An adventureish level. Nice, but wasn't always sure where to go next.
Station 07: a level with a simple but enjoyable scifi story
Return to Luminous City: Ok, so i haven't played this one yet but it's been recommended a lot.

It Waits: A fairly creepy level with great but unsettling atmosphere.

Puzzle levels
Scrolly Polly: very cleverly done
Chamber of Trials (in official 3rd party pack): darned hard, but kind of interesting.
Gustav's Daughter (official level): Neat use of themed puzzles.

(Note: obviously play the official levels first. Or the original game, Knytt. Though the original is kinda long, but also the best standalone game)
(Favorite official expansions! The Machine, Sky Flower, an Unfinished level)