I debated about this choice for quite some time. Comedy is a hard genre to plug into the typical pop music canon. For example, I can't imagine that The Hannukah Song made many best of lists but the truly hilarious Apollo 18 by They Might Be Giants is a masterpiece. Adding to the complications with this song is the fact that Flight of the Conchords are a made for T.V. band, and placing them in the company of the Monkees, Partridge Family, and 2gether* is perhaps the strongest argument AGAINST their musical merit. Despite this, I kept coming back to one thing when listening to this song... I really enjoy it. I defy anyone to sit completely still while listening to the Stan Getz-esque bossanova guitar strumming and hand claps that give the song that 70s lounge act feel for which the Conchords' Jemaine Clement and Brett McKenzie were clearly going. The true revelation on this and many other tracks on the album however is the range and versatility of McKenzie's voice... whether rapping (Hiphopapotamus vs. Rhymenocerous), whispering fantasy lyrics (Prince of Parties), or spitting a full scale dancehall banger (Boom), Brett plays the role of vocal chameleon that's essential to the thin line between satire and ridicule that the boys from New Zealand tread.
Ladies of the World stands out as the highlight here both for its subtle humor (just about everything sounds relatively believable as a legitimate pop song aside from the hilarious aside on the "sexy hermaphrodite ladies") and tag team featuring of both vocalists' strengths. I don't know that the 2nd season (airing soon) can top the highs of the first season's soundtrack but getting anywhere close to the fun of Ladies of the World should be considered a rousing success.
* If you remember 2gether then chances are you are between 21 and 28, white, and were probably nearly as lame as I was in middle/high school