Probably Transformer is the best album to start with, Coney Island Baby is good, but he's also put out a lot of crap....specially the late 70s/early 80s stuff.
A couple of albums I'd reccomend are the New York Album and a more recently Set the Twighlight Reeling for later Reed stuff.
If your not put off by depressing music then you have to listen to Berlin Live at St Annes Warehous. Its not one to play at a party, but a brilliant, albeit harrowing listen.
[youtube]http://www.youtube.com/watch?v=zfm499smiwo[/youtube]