I have never heard 'happy as larks,' but 'happy as a lark' is a common expression. A lark is a type of bird, and its song sounds quite happy. "Happy as a clam" is another expression. In England, I've heard "Happy as a sandboy." I am not from England, so I do not know what that means :P

The correct expression is "to be as happy as a lark". I don't believe, however, that this expression is widely-used these days. Another expression we use in the UK, which in fact seems to be much more common, is "to be as happy as Larry". Nobody seems to know who Larry was, by the way.

I agree with Robert and Peachey although if you said 'as happy as larks' people would know what you meant especially as it's plural. The phrases 'as happy as pigs in mud' is similar.

I've only heard the singular phase also. Robert, I checked up on "sandboy" (I thought it was like a clam, but no). Apparently the phrase comes from Bristol, where tavern owners would hire boys to go collect sand, which would then be spread over the tavern floor to soak up spilled drinks. These sand-boys were paid in beer, so I guess they were quite happy. ;)