I've had great experiences with tkts for smaller shows, where even the worst seats are great because the theaters are so tiny. The bigger ones I've tried were very cheap, but not such great seats. I saw Urinetown and Chicago for about $15 each, both from the ceiling. But it sounds like others have had luck.
About buying tickets the day before: sometimes that helps, sometimes not, since theaters release tickets at various times, sometimes only nearer to showtime. In any case, have several things in mind that you'd like to see so that standing in line isn't a waste in the end if your other choices are sold out.
Also, if you know what you want to see, you might try "rushing." Every theater does this differently. Some only do student rush, but some do general or lottery. Check with the theater to see how it works and what time they open. These are usually very, very good seats for around $25 or so.