I second the ringing endorsements for Andalucia. As a Brit, I'm well aware of the negatives of the Costa Del Sol and having spent two nights there last summer agree with them - to my mind there is no point including it in a trip and when we got there never felt incline to visit the beach, the original reaon to go (Marbella would appear to have some of the best hotels on the Spanish coast but also some of the biggest/worst so this is not a redeeming feature). If you enjoy independent travel rather go elsewhere; fortunately you don't have to go far inland to escape this.
The cities are wonderful - specifically we enjoyed Seville, Cordoba and Granada. They also form a natural route that allows you to stop-off in the countryside (personal favourite was around Zuheros but am no expert). With more time you could start in Madrid and/or finish in Murcia as suggested (La Manga, in a less over-developed area of the coast). The best area of coast probably is the Costa de la Luz, west of the southern tip but I'm not sure how you fit this in, or if the hotels are as well-established (perhaps that's a plus). As mentioned, the Paradors - government-run (don't be put-off) hotels, often occupying historic buildings such as a convant
inside the Alhambra - are great value and totally unique. They don't show up on expedia, etc. but are popular: book early at
www.parador.es. They have various special offers including discounts if you're under 30.
With respect to the Italy comparisons, I like both but I came back with the verdict that Italy is overrated (it rather plays off it's famous landmarks) and Spain is an underrated gem. Not sure which I prefer, but Andalucia was a lot quieter in August and certainly deserves more good press than it gets (thanks to the north-Europeans).