We moved to Lux 5 years ago and I work in Kirchberg. Although there are quite a few traffic jams, the city is small and half an hour's commute will get you to a fair bit of the country! We live out in the west near Belgium but it only takes just over half an hour (bus or car) in rush hour and 15-20 minutes other times.
It depends on lots of things really. Do you have kids, and if so what type of schooling would you choose for them? If the European School is an option (mainly for people working in the EU institutions) then that makes a difference to where you'd want to live.
Money is obviously a factor too, as the city is a lot more expensive than the villages, depending on the village. If you have plenty of money then Limpertsberg is very nice, close to town and close to Kirchberg. Another pricey but popular area is Belair. Merl has a lovely park. Bonnevoie (near the station, though you should avoid the areas right by the station) is more socially mixed and much more lively. I know lots of people who love it there. We initially lived in Gasperich, also near the station - it's a cheaper area too and we found it pretty good. Pretty much anywhere will be fine!
If you'd prefer a village, then the ones towards the east (Niederanven, Moutfort, Roodt-sur-Syre, Schuttrange etc) are fairly close to Kirchberg. But Luxembourgish villages can be very quiet, so it depends what you're looking for.
What I love about Luxembourg is the easy access to nature as the forest is always nearby. I find the 'city' very quiet but have got used to that, and you end up making friends and that provides the Entertainment anyway. There is a lot going on for a city this size, good concerts at the Philharmonie, good range of original-language (ie English) films at the cinemas, lots of street festivals during the year. You're also near to lots of interesting places to go for weekends (Strasbourg is 2 hours' drive, Paris 3 hours, Aachen and Maastricht 2 hours, Cologne 2 hours etc).
But the people are quite traditional and everything is closed on Sundays except for restaurants. On the upside that gives a bigger emphasis on family life, and it's an amazing place to bring up kids - beautiful parks and playgrounds, and more independence at a younger age than in other cities as it is all very safe.
There are loads of foreigners - half the population of Lux-Ville and 40% of the country, plus the border workers coming from France every day. This means you can choose to live your life in an expat environment if you want to, although personally to feel more integrated I think it's important to learn some or all of the languages. Do you speak any of them already? Again, schooling choices make a big difference here - some people are very put off by having their children schooled in Luxembourgish and then German and then French, but for others it's a great way to integrate.
Right, sorry for the novel but hope it's helpful!!