Hotels: Most of the sightseeing is done on the Puxi side of Shanghai so it would be advised to stay at a central hotel there. Portman Ritz Carlton, Four seasons, JW Marriott are all good hotels. Mid-range would be places like Hilton, Equatorial, some local hotels. I would advise you to stay either in the Jing'an Temple area or the People's Square area.

Restaurants: A dinner on the Bund at either Jean Georges, M on the Bund (downhill lately), Laris is a great way to enjoy the views of the riverfront and Lujiazui on the Pudong side. If you're looking for Chinese food, there are a lot of choices. An area called Xintiandi has some nice places, both western and Chinese. You should ask your hotel to get a copy of That's Shanghai magazine for you. They have all the restaurant listings and events listed.

Eating from the markets: If you mean the Xinjiang guys selling meat skewers on the street...i've never gotten sick from eating the meat sticks, but lots of
friends have.

Sights to see: The top floor of the Jin Mao building in Lujiazui, Yu Yuan gardens, the pearl market, underground market at the Science and Tech. Museum, Shanghai history museum, Shanghai art museum, People's Square, Nanjing Road....

Travel to Nanjing, Suzhou, Hangzhou: Nanjing and Hangzhou are recommended. There are bullet train connections and these trips could be done in a day. Nanjing has several museums and the city wall is pretty spectacular. Hangzhou has the lake (not advised in 40 degree weather) and temples, etc.

Hope this helps a little