Smash is always fun with the right bunch of friends. Hardcore players might only want to play on Final Destination with no items, but for me, it doesn't get much more fun than Mushroomy Kingdom or Big Blue with all items turned on.
Can't go wrong with Mario Kart: Double Dash. MK Wii is pretty fun too, I guess, but I like Double Dash's sense of teamwork more. Plus, you can have four people playing at once and only split the screen in half, as opposed to splitting it into fourths.
Mario Party is always incredible, but only for the first few rounds. I wouldn't say I could play it all night.
Finally, I'll go out on a limb here and say that Halo has some pretty fun local options. Considering the huge amount of customization available, it's sort of like having a shooter, a racing game and a platformer all in one. If that aspect doesn't do it for you, I've always thought that while LIVE is great, there's nothing like shooting a friend in the face who's sitting right next to you, possibly within punching distance. The fans of Goldeneye 64 know this, I'm sure.
