Panama City is OK, but personally, I don't like it. It's dirty. They let people drive on the beach and the sand is all gray and dirty looking. If it wasn't for these damn hurricanes destroying my hometown, I would recommend Pensacola Beach, which is about 2.5 or 3 hours away. Beautiful white sand beaches. Some of the beach is reopened, but not much. Still nice place to go though. What's left of the beach is still pretty!
I had some friends who went to FSU for undergrad, and they used to go to St. George Island. I've never been there, though, so I can't comment on it.