New Yorkers love doing brunch on a Sunday and if you want to watch locals doing local stuff, head to Silver Spurs, on Houston (pronounced How-ston NOT Hugh-ston). The menu is written in a cutesy, annoying way but the food (burgers, salads, sandwiches ... American style diner food) is excellent and the portions generous. Try the egg & cheese sandwich with sausage. It's a great place to view the tourists and locals as they go in and out of SoHo.
Silver Spurs - corner of Houston & La Guardia or 771 Broadway (E. 10th & Broadway)