Let me first state that truly awesome Mexican food or even awesome US-American-Mexican food like you could get in Texas or California is completely out of the question in Chiang Mai. :) There are quite a few Mexican restaurants though, and most of them never see a Mexican either working there or coming to eat. If you adjust your expectations accordingly, you can still find some interesting Mexican-ish food that's good in taste and a nice change from regular Asian or Western food.
Such a place is Salsa Kitchen, it's a pretty basic wood & bamboo semi-outdoors affair, run by a Canadian and his Thai wife. Prices are friendly too, big servings of all the common tex-mex staples are on the menu for 70-100 baht each.
Salsa kitchen is in a fairly recently developed plot of land on the corner of Ratwithee and Ratchaphakinai Roads. If this doesn’t ring a bell, this is where you drive past the Irish pub and then either enter the little soi on the right immediately after the Irish Pub and then left, or continue until the traffic lights and then turn right, and then right again into this area where mostly some backpacker reggae/rasta themed bamboo bars are located.