Leonard Cohen is a fantastic songwriter. His singings not great though. Every cover version of his sons seem to be better!!!.
I was given a copy of one of his albums. The guy said it was like taking mogadon. Sure enough, I fell asleep midway though the 2nd song, and woke up just as the last track finished.
The Skids - 'TV Stars' 30 seconds of shear ecstasy. Who can forget lyrics like
Ena Sharples nanananana, Leonard Rossiter nanananana, Albert Tatlock NANANANANA, Albert Tatlock NANANANANA, Albert Tatlock NANANANANA....
Hermann loves Pauline (about Einstein's parents) by Super Furry Animals always makes me laugh.
"Hermann loves Pauline and Pauline loves Hermann
They made love and gave birth to a little German"
Ben Folds is a pretty funny bloke.
Most of the bands I like, in fact most good bands in general, would have some sense of humour and irony in their lyrics... otherwise they would be Bono.
Ill second The Divine Comedy mention, and The Who.
And Ben Folds, as has just been mentioned above.
How come nobody has mentioned The Bloodhound Gang, Jimmy Pop's lyrics and word play is brilliantly funny, here's some of my favourites:
Women are like dog-doo, hear me through don't interrupt/
It's just the older that they are the easier they get to pick up/
I know I'm known as Polaroid, no I'm not a total retard/
It's cause I'm done in sixty seconds and you'll still want it enlarged/
Did you ever read Voltaire's "Candide"?/
He says live life at Benny Hill freak out speed/
Not a quote of what he wrote but a paraphrase/
Make it up as you go Keyser Soze/
Highlights yes but don't underline 'em/
Just live for N.O.W. like Gloria Steinem/
Life is like Marion Barry/
It's not all that it's cracked up to be/
Like Fred Sanford when the big one comes/
Find the meaning of life is there is none/
It's twenty-four hours when you call it a day/
Be Frank and say "I Did It My Way"/
Don't give a flying nun no don't give a Gidget/
Just have more fun than a well-oiled midget/
If life were picture perfect you could frame it/
But the world is a diaper so let someone else change it/
You should try to check out Dory Previn. Quite neurotic ex-wife of Andre. Some of her stuff is really weird but funny at times too.
I'd also have to go with the Smiths for wittiest lyrics.
One that hasnt been mentioned that amuses me are The Streets. And Wesley Willis. Perhaps not the wittiest man to have ever lived, but theres something about that bald, obese, black man playing only a casio keyboard and singing such classics as "suck a cheetahs dick" and "cut the mullet." ('Get the rat's nest off your head / Get that crazy-ass mother off your skull / Take your ass to the barber shop / Tell the barber that you're sick of looking like an asshole.) So long as you only listen to it once, because it can get old real quick, as you could probably imagine...
What about The KLF? (and don't say what about the KLF)
I agree with Rosco -it has to be Half Man Half Biscuit. The funniest lyricist now is P. Diddy Coombs, or 'Diddy' -but he doesn't know it. He came up with the line, 'Young black and famous/With money hangin' out the anus.'
But a dark horse is early Human League. Check this out from the album, Travelogue - a song called 'The Black Hit of Space', about a vinyl record that became unfeasibly popular:
Been out all night, I needed a bite
I thought I'd put a record on
I reached for the one with the ultra-modern label
And wondered where the light had gone
It had a futuristic cover
Lifted straight from Buck Rogers
The record was so black it had to be a con
The autochanger switched as I filled my sandwich
And futuristic sounds warbled off and on
Chorus :
The Black Hit Of Space
It's the one without a face
It's the one that doesn't fit
You can only see the flip
The Black Hit Of Space
Sucking in the human race
How can it stay at the top
When it's swallowed all the shops?
As the song climbed the charts
The others disappeared
'Til there was nothing but it left to buy
It got to number one
Then into minus figures
Though nobody could understand why
(Chorus)
I couldn't stand this bland sound any more so
I walked towards my deck to turn it off.
All I could see was the B-side of the disc
which had assumed a doughnut shape
with the label on the outside rim.
I reached for the arm
which was less than one micron
long but weighed more than
Saturn and time stood still.
I knew I had to escape
but every time I tried to flee,
the record was in front of me.
The Black Hit Of Space
Get James Burke on the case
It's the hit that's never gone
Time stops when you put it...
Slightly off topic, but I love the stories of people using inappropriate songs for occasions because they have misunderstood or not bothered listening to the lyrics. I once heard Elvis Costello's tirade of obsessive vitriol "I Want You" being played as a love song dedication on Radio 1; and there are numerous reports of people using the Police's "Every Breath You Take" as their wedding song, without irony.
I know of people who had, 'You've Lost That Loving Feeling' as the first dance at their wedding. Bizarrely, they're still together. Ignorance is bliss.
My brother had Your Gorgeous by Baby Bird for when his wife to be walked down the isle. I remember old grannies being shocked at lyrics about taking pictures of you lying spread eagled on car bonnets and other such things. Most amusing
The Human League and Quantum Physics, why am I not surprised the combination is funny. 
Quote: Blenkinsop @ January 25, 2007, 7:08 AMHave to agree with you there SlagA.
XTC are the biz and lyrically very sound. Anybody wanting a treat should listen to Nonsuch (brill) and Apple Venus Vol 1 (one of my all time fav albums)
Sharp as a tack and great songs too.
Top choice with Nonsuch. Love English Settlement too. Sorry I'm late on this but I love XTC to bits