Oh gosh. Where don't I like to people watch is the question. Well, anywhere along Main Street is the obvious choice, because that is the main thoroughfare through which all people pass at some point or another during their DLR visit. You can really get a sense of the cross-section of people from all over the world, from all different backgrounds, who come to the Happiest Place on Earth by claiming a spot on a bench and planting yourself for a long while. I also like to sit in the Paradise Pier area of DCA and people watch. As stated by a PP, the Rivers of America area is great to observe people.
This is not IN the parks, but I like to plop down in the huge lobby of the GCH (in the comfy chairs) and watch folks pass through. That is very relaxing. Downtown Disney is also a hotbed of people-watching activity, and many of those folks do not go into the parks so you can see some really interesting folks.