I haven't been to every street fair in NYC, but I feel like the annual Atlantic Antic might be the best one. There's probably 6-10 live music stops along the route that runs down Atlantic Avenue in Brooklyn, NY.
The highlight this year for indie rock fans was the stage outside Magnetic Field. Bands like Detachment Kit, the Hong Kong and the Ponys played for free to fans and random passerbys.
After seeing the White Stripes in Coney Island the night before, I arrived just in time on Sunday (September 25, 2005) to catch The Ponys' full set and spend the rest of the day walking around.