The main cluster of bars in South Padre are on the 2300 block of Laguna Blvd. With a line outside, and the loud music from the inside, Louie's backyard looked like the most popular. Plenty of parking is available out in front of the bars, but it is within walking distance of several of the hotels. There is also a free bus available during Spring Break, called the "Whammy Liner" that runs from 7:30 PM to 3 AM. Here's a map of the route.
To find Louie's, look for the spotlighted Bungee Tower. It can be spotted from almost anywhere on the island. Bungee jumping goes on all night at what claims to be "the largest entertainment center in the city." During Spring Break, Louie's also offers live concerts, comedy acts, and the Miss Hawaiian Topic Bikini Pageant.
After standing in line for about 10 minutes, we paid the $5 cover and walked into open-air the downstairs bar. With lots of tables, and a big bar in center, people were mainly down here to talk and drink. We grabbed a drink (I got a huge $9 hurricane in a keepable plastic cup - It was fruity and didn't taste like it had much alcohol in it, but I think it had quite a bit) and headed up the stairs where the music was coming from.
Upstairs is where all the craziness starts. It was PACKED with people. For a random weekend in the summer, I was really surprised. I can only imagine what this place is like on Spring Break. It was hot, the music was loud, and the dance floor & stage was packed with tanned 20-somethings getting their groove on, glistening with sweat. On the outskirts of the dance floor there are a bunch of tables and a bar. Everything is open to the elements (i.e. In July - the heat & humidity) and the whole place overlooks the bay.
Several drinks later (having switched to $9 extra large rum & cokes) and after dancing for a long time to the hip-hop and pop music, we were drenched in sweat. Heading off the dance floor, we found heaven in the form of an airconditioned room with the bathrooms and lots of booths and 50s decor. I'm guessing this is the indoor part of the restaurant. There was also a bar in there, but it was closed.
In Texas, all bars & clubs close by 2 AM. We closed the place down and really enjoyed dancing all night, even if we were hot and sweaty.