One of the happiest periods of my life while at the same time being the toughest period of my life was those few years of my childhood in LOS. I love the place, people, culture, food, lives and almost everything there. When I was a kid, I often thought of moving to stay in LOS at some point in my life. Retirement in LOS is one of the things often poping up in my mind, maybe mainly due to my childhood memory and experience. The only problem for the foreigners is they cannot own landed property there (at least for Bangkok, for other cities, I am not quite sure). However, for most of the condominiums, buying is not a problem. I went to Chiang Mai when I was a little kid and it was just beautiful. I have not been to Chiang Mai since then. Every time when I visit LOS, I mostly go to Bangkok. Next time, when I go there, I will certainly go to Chiang Mai and Chiang Rai.
For the language issue, I can speak perfect Thai and so this should not cause any problem to me. But most Thai people are eager to communicate with the foreigners in English. Even for some of those who can speak, their English may not be top-notch but it is effective enough for daily communication. Thai people are so friendly and you can always feel you are so welcome there especially if you show your interest in their culture and in blending in, you can easily feel you are one of them.
What you said is true: Chiangmai being a popular place for retirement for Thais (not sure whether it is no.1 choice or not). A lot of my relatives there in Thailand including my aunts, uncles and cousins have bought their houses in Chiangmai for retirement. By the way, each family of each of my relatives has several cars (even though they are just normal people, certainly not the rich ones) and obviously has a decent life there. I once asked them whether they were interested to move to or retire in other places. They all said "no" because they love Thailand and they said if they could earn money there, they would certainly not consider any other countries and for retirement, they all thought it must be Thailand.