My favorite place in an RPG? Oh, god, there are too many!
I enjoy the Floating Islands of Zeal, but I also like it when the islands have fallen and everyone's together. The City of the Ancients in FF7 is high up there, too, along with Balamb Garden (no matter how many times I get lost there) in FF8, Terra in FF9 (not Bran Bul. Hate Bran Bul.), and Zanarkand in FF10.