Since there's a lot of sugar/lime in the margarita, I wouldn't go with the really good stuff because the subtleties get lost in the mix. A good Sauza tequila like Hornitos, or Commemorativo (although it's price has doubled in the past 5 years, would work just fine. Sauza's Tres Generacions has really gone up in price and I believe it is their top end.
Of course if you don't mind dropping $50 on the Patron for Margaritas, you probably won't ever have a smoother one - especially if you like them strong.