I too am planning our first trip to Greece for May 2008 (yes...2008 but I booked all of our Starwood hotels BEFORE the points devaluation!) I did some research on the topic and have pretty much decided on the following:
2 nights in Athens at the Grande Bretagne (Booked at old Cat. 4 - 10k price) Most people say 2 night is enough!
3 nights on Crete at the Blue Palace (Booked a bungalow with the private pool for 13,500 points per night! Not sure what this upgrade would cost in points now.)
2 nights on Santorini at a non-SPG hotel. Mystique was not available and I assume it will be between 40-50k points per night, since it is listed as an all suites/villa hotel thus requiring double the Cat. 6 points. Vedema doesn't look that nice and the reviews have not been great on FT. The following hotels in Oia look incredible:
Ikies Traditional Houses -
http://www.ikies.gr/
Katikies Hotel -
http://www.katikies.com/
3 nights on Mykonos at a non-SPG hotel. Had read in previous posts that the Santa Marina was not worth the points like jayzee9 stated in his post. I also didn't like the location of the hotel. We are looking at smaller hotels in Mykonos since we want to be close to Mykonos town. Some of interest might be:
Harmony Hotel -
http://www.harmonyhotel.gr/
Rochari Hotel -
http://www.rochari.com/
Belvedere Hotel -
http://www.belvederehotel.com/main.htm
Apanema Hotel -
http://www.apanemaresort.com/
Mykonos Theoxenia Hotel -
http://www.mykonostheoxenia.com/index.htm
You might also want to check out the following for more info on hotels in every budget range:
http://www.greekhotel.com/home.htm
Travelling between the islands is convenient either via Olympic or Aegean Airlines and the ferries.