The option between Cusco and Aguas Calientes is the train--there are 3. A backpacker train that is really pretty sparse I think. The regular train which is what we took--seats are pretty cramped, but scenery is interesting. There is also a really luxurious train that is pretty expensive. It looks nice, but not worth the extra cost. Other option of course would be hiking for 3-5 days.

Lima is a pit in my opinion. Only a couple of museums and the cathedral which has Pizarro's remains. Would skip if altogether except as a transfer point.
In Lima, I recommend the Melia Hotel--very nice, quiet, and outstanding breakfast. We also stayed at the Doubletree on our return--I was very disappointed, and I am usually a big Doubletree fan. It was very noisy and kind of run down.
In Cusco, we stayed at the Liberatador going and the Monasterio on return. Both are excellent, but unless you really want to spend a lot of money, the Liberatador is the better option--modern, cool high tech elevators, comfortable rooms. Monasterio is all about history and the experience. Rooms are nice, but not worth the price.
In Aguas Calientes, we stayed at the machu Picchu Pueblo Hotel--absolutely my favorite place of the whole trip. Rooms are scattered among a garden. Very quiet. The rest of the town is pretty run down, but this place is top notch. Definitely worth the money.