Brigitte and I were in Santiago last August and enjoyed our trip very much. We did take the bus from Valparaiso to Santiago and it was very nice, comfortable and inexpensive (as Jim_B mentioned).
While in Santiago we stayed at a very nice efficiency apartment hotel in Las Condes called Vecinal Park Apartments. The apartment we were given was a 1 bedroom unit with dining room, living room and full kitchen, nicely furnished on a high floor with a great view from 2 corner balconies...all for the princely sum of $70 USD per night. If you hold a non-Chilean passport, you won't have to pay any VAT (sales tax).
Las Condes is a trendy and upscale area close to a lot of shiny new office highrise towers (Jim_B's office is just around the corner) and also features a number of bars and restaurants.
I would certainly recommend this property and area. The Metro (subway) and shopping is close-by yet the building is on a quiet residential street. We booked our stay using http://www.chile-hotels.com . They were very efficient and friendly. Our contact was Rosario Bravo.
Have fun, and don't forget to indulge in a bottle of wine or two.

Cheers,

Rick