Avoid small islands. CFU and RHO are the places you wanna visit. I love the town of Corfu, it just has something magic that draws me back there whenever I can visit. Unlike Rhodes, it's a university town, so it doesn't slow down noticeably during winter ^
Corfu Palace is the typical 5* hotel of the town where VIPs and government officials usually stay when visiting the town, and where the local Football Club hosts press conferences every so often. Haven't stayed there, it should be good but I can't imagine it being extra special. There are few hotels open throughout the year in Corfu town.
Corfu Palace would not be my first choice, however. I'd choose between Bella Venezia Hotel and Siorra Vittoria Boutique Hotel as these places are better aligned with the ambiance than your standard 5*-with-an-indoor-pool property (which the Corfu Palace is).

Similarly, in ATH I'd much rather stay at a boutique hotel near Plaka than choose an airport-sized facility down on Syngrou (e.g. the Intercontinental or Marriott).

Even if I'm Greek and have lived there for about 20 years, I have never been to Crete so I cannot comment on it but as I said above, I would think *very* hard about going anywhere else apart from CFU.

Hope this makes sense