You can drive a Thai registered car into Malaysia.
1. You need to bring the original title plus an English translation. (Pattaya Land transportation office, 25B, same day)
2. If the car is not under your name u will need an authorization letter from the car owner.
3. After the immigration check points, at the shops, u can buy Malaysian insurance and translated car number plates.
4. With all the above paperwork, u can get a 30 days permit at the Malaysian authority near by.

I drove my Thai car out of Sadao, Thailand, into Bukit Kayu Hitam, Malaysia.
After the Thai and Malaysian immigration check points, I drove further to made a U-turn to get insurance and translated number plate stickers at the shops. One month insurance for my Toyota Fortuner was 700B, plus another 80 B for the stickers.
At the small Malaysian Road Transportation Department office, an officer told me the title translation should be from a Thai land transportation office, not from a language school/travel agent like the one I had. However, he would make an exception since I had the original. Thank you.
He issued a one month permit, but not before making me ripped out the window tinting at the front sides. It was too dark according to Malaysian law. Ouch!!

The Malaysian officer at the border accepted my Thai driving license(DL)..However, I didn't feel comfortable driving there without a Malaysian DL. A few days later I went to get it. I took advantage of the Foreign Driver License Exchange program in Malaysia. It wasn't an exchange because they let me keep my Thai DL.. :)
I went to the Thai embassy in Penang to get my Thai DL translated (120 Ringgit, original DL, 4 copies of it and 3 copies of passport..took 3 days to translate from Thai to English). Then I went to the Road Transportation Department to get my Malaysian DL with :
1. Original Thai DL and the translation.
2. One DL size picture.
3. Passport and a copy.
4. payment of 30 ringgit/yr, 5 yrs maximum expiration.
5. A standard form filled.
I didn't have to stand in the long line, I didn't have to take any tests, and I got my DL in about 15 minutes at the Penang Seberang Perai office.
Source: travelpod.com