I took a college graduation trip with a friend. It was a trip of a lifetime for both of us, so our expectations for that were similar, but we were in different positions financially. I had parents contributing a lot more than hers were, and I had more saved up overall.

Neither of us were at all interested in hostels, so we found some very affordable 3* or so hotels that worked out great. Our interests in what to see also aligned pretty well. The mistake I made was paying for things and letting her pay me back. It took months of her avoiding me after we got back before I finally managed to get her to pay me back. Our friendship is pretty much over, though I know there were several other contributing factors as well.

The next year, I went with a different friend who was also a coworker. Our financial situations were very similar, and our travel styles/interests were the same. That worked out great.

She got married, though, so since then I have traveled by myself. I love it. I think both ways (solo or with a friend) have their pros and cons, but I would never hesitate to go by myself (other than safety reasons).

It sounds like there are definitely potential issues going with your friend. It's good that you were able to talk it out, but you don't know that his mindset isn't going to spring up again during the trip. Most things are expensive in Europe. I would give serious consideration to going by yourself.

Regarding some of the other discussion in this thread:
I still refuse to stay in hostels. I am very introverted and being around people a lot drains me, and I see no reason not to stay in nicer/more comfortable hotels when I can afford it. I still manage to meet some people on my trip, though. You don't have to stay in hostels or go out drinking to have a great trip, despite what some others have said. It's just dependent on what appeals to you. I never went out and partied a lot, even in college. It's still relatively easy to meet locals even while staying in a decent hotel, if that's what you want to do. I don't see how staying in a hostel helps you meet locals - the locals aren't staying in the hostel, other visitors are.

As for what to do when you're there, again, it depends on what you like. For me, the tourist sights and cultural experiences (museums, etc.) are why I'm going. If all I wanted to do was party, I could do that at home. That's me, though; I'm sure you have different reasons for going. Don't let anyone else tell you what's right or wrong about your trip. Just enjoy it.

On a side note, I went to Jungfraujoch last year. It's a gorgeous view, but the altitude sickness I got halfway up the mountain that only got worse made the whole thing very miserable. Of course, I've also lived at sea level my whole life.