I grew up in Albany, and I am back there frequently. I can assure you it is not, in fact, a wasteland!
I recommend:
Cafe Capricio - great Italian.
Nicole's Bistro - elegant French
Karavali - really good Indian food
McGuires - great bar and fun "New American" food
Jack's Oyster Bar - classic seafood/steakhouse restaurant
67 Prime - great steaks
Avenue A - wine bar
sorry for the lack of in depth descriptions! But believe me, Albany has some real gems in the downtown area. You just have to get out of the suburbs and you will find some amazing chef-owned restaurants.