Avoid the ball drop at times square. I did it once and it's totally not worth it. All you hear is people screaming "where's the ball?!? I don't see it?!?" - yeah, it's that unimpressive. Looks much better on TV, so just tune in to one of the channels broadcasting it (or stream it from the web).
Either spend it with friends and/or, as Yimmy suggests, get one of those all-you-can-drink tickets. Expect to spend a lot of time in line for drinks, though.