Hmm, I've gotten interested in fan fics recently. Mostly Naruto fics, but I've read some others. It might well be true that 90% of everything is crap, though I wonder if that's being too generous for fan fiction.
Looking for good fan fiction often seems to be about avoiding things I hate. I find a lot of the common Naruto fan fiction tropes rather bizarre. For instance, the Kyuubi is NOT a big, helpful teddy bear and he certainly doesn't give a dang about whether Naruto is happy or not. Yet time and time again I see the Kyuubi being pretty friendly with Naruto. Now, I wouldn't mind this sort of thing if some sensible reason was given or if it was done with some sort of character development for the Kyuubi, but it seems like a lot of 'writers' just like skipping those "boring" parts of the story. The problem is, those "boring" bits are actually what makes a story worth reading and without them there really isn't character development, but instead characters just suddenly changing.
Similarly, I don't like character bashing. Sasuke is a jerk, sure (though before the time skip he does have some redeeming qualities). However, there's no need to have a bunch of mindless character bashing if you want to show how's he is a jerk. One doesn't have to diminish his character by piling on a bunch more flaws like cowardice or the like either. He already has the elements that make him a jerk. He's incredibly arrogant and can't handle Naruto or anyone else his age potentially being better than him. He also very much has an attitude that killing Itachi is something for him to do by himself and that's more important to him than his friends. One need not bash the character to portray him in a bad light. The story just needs to show off these horrible character flaws in a natural way, and have other characters react to them naturally. Instead I find a lot of fics where Naruto acts like a far, far bigger jerk than Sasuke, because the writer feels treating Sasuke horribly is "ok," of course this means Naruto is acting more like a villain than Sasuke, but no one in the story notices that.
That of course leads us to the reverse of bashing, where a character is treated as great and awesome no matter how depraved his actions. Sometimes this uses the idea of acceptable targets, where the author decides any abuse heaped on certain other characters can't be evil. This of course is WRONG. Going around sadistically torturing people for no reason, giving them a fate far worse than death when other options are available, or any number of other vile acts are evil even when done to villains (or people the author doesn't like). Another way this sort of thing pops up is through protagonist-centered morality, where everything the main character does is defined as Good, even if it is slaughtering towns, letting innocents die that could be saved, beating the crap out of a friend for no reason, etc. Often these sorts of things go hand-in-hand with character bashing, but not always.
As for what I like in fics, that's pretty easy to explain. I like a bit of romance, and I'm partial to the Naruto and Hinata pairing, though I've read good pairings for Naruto that involve Sakura, Ino, or others. I prefer fics that focus on Naruto, since I like him the most. Generally I like Naruto to keep his positive attitude and be a truly good person (I like my good guys to be GOOD), but I enjoy it when he's written as a bit smarter than in canon. Kimishmoto seems to have a thing against smart characters (he's said as much), and so Naruto oddly is an 'idiot' who is actually really good at planning things out and coming up with clever ideas -- this does not make a whole lot of sense. Related to that, I enjoy it when he uses is Kage Bunshins in an intelligent manner, fully utilizing their ability to think and gather information for him. Between that and his access to the Kyuubi's chakra, it seems to me canon Naruto already has enough basic powers, so I do not understand why so many people want to give him a bloodline ability -- he really doesn't need it. I'd be far more interested in a fic that explored the idea of Naruto users clones to combine different chakra types for ice and other hybrid elements than in one that gave him a bloodline to do the same. I also enjoy explorations of fuuinjutsu with Naruto, especially since the Uzumaki clan were supposedly legendary users of sealing techniques.
Pet Peeves regarding Naruto Fics (these don't necessarily ruin a story for me, but I find them annoying):
Abusive Village: The Hokage would never put up with it. There's a death penalty for even mentioning the Kyuubi, you don't think he'd also sentence to death anyone that beat on Naruto?
Hyuuga Elder Council: Hiashi had to seal his own twin brother. Exactly how does anyone imagine there's a whole bunch of unsealed Hyuuga? There'd at most be Hiashi's parents and grandparents.
Evil Village Council: In canon they really only ever express reasonable concerns, save Danzo. Yeah, having Naruto confined to the village is boring for the reader, but when he has a powerful demon the enemy wants to use in some way, it is something to consider. That said, it is mostly how overdone this is that annoys me.
Everyone is a jerk for having Naruto grow up by himself: Granted it is a bit insane that they do this, however it is more of an arbitrary plot device so that Naruto faces things alone. Kishimoto clearly intended it as an admittedly unrealistic story tool so that there were fewer adults hanging over Naruto's head and to emphasize Naruto's loneliness, not as something to make the Third and others look bad. Please note, when Sasuke's clan is killed they leave him to grow up by himself too. This was clearly intended as something we're supposed to take as an acceptable break from reality.