Arraial do Cabo [1] to the south and Búzios [2] to the north are much more attractive places to stay than Cabo. And since they’re both so close (Arraial is only 6 kilometers/4 miles away), you’re better off staying there and day-tripping to Cabo Frio. Cabo Frio [3]’s forte is seafood, and unsurprisingly, there are many places to indulge in the ocean’s bounty.
Hippocampus (Rua Marechal Floriano 283, tel. 22/2645-5757, 11 a.m.–midnight daily, R$20–30), with tables overlooking the lively Canal Boulevard, is a great place for people-watching while digging into grilled fish and seafood.
On the same street, but slightly more upscale, is the traditional Picolino (Rua Marechal Floriano 319, tel. 22/2643-2436, noon–7 p.m. Sun.–Mon., noon–midnight Tues.–Sat., R$30–40), located in an attractive 100-year-old house and reputed for its tasty fish dishes. As a warm-up, diners receive a platter of squid and mussels bathed in a mustard sauce that is justly famous.
Links:
[1] http://www.moon.com/destinations/brazil/rio-de-janeiro/costa-do-sol/arraial-do-cabo
[2] http://www.moon.com/destinations/brazil/rio-de-janeiro/costa-do-sol/buzios
[3] http://www.moon.com/destinations/brazil/rio-de-janeiro/costa-do-sol/cabo-frio