Susan Marshall's cover of Steely Dan's "Dirty Work" blows me away. Actually, anything she covers is amazing.
Dave Cousar (local guitar player) does a cover of Prince's "Little Red Corvette" that I can't get enough of. It's possible that he will have a recording of it in our lifetime.
John Cale's version of Leonard Cohen's "Hallelujah"
7 Seconds' version of Nena's "99 Red Balloons"
Gary Jule's version of Tears For Fears' "Mad World"