A lot of people say not to book things in advanc, and to keep the schedule loose and not rigid. I think its better economically to find a fine balance between the two, where it isn't super rigid, but some things like the expensive transportation (ie bullet trains) and some longer stays in cities are done in advance.
You can find some wicked good deals for trains in Europe and ferrys throughout greece.
If you take trains in Italy, and you're expecting to be on a Eurostar Italia Alta Velocita (their bullet train), you can get their fare dueperuno; just two for one, online ahead of time. Super damn cheap and fast. Extra reliable. Italy in general has so many trains in the country its not even funny.
I would highly recommend check out: http://www.voyages-sncf.com/dynamic/_SvTermDiscount?_TMS=1178841809046&_DLG=SvTermDiscount&_LANG=UK&_AGENCY=VSC&_CMD=processJSP&JSP=gestedit%2Fleisure%2Flayout%2Flaunch%2Ftrain_promos.jsp
if you intend on taking the TGV anywhere in France (which you almost have to). It is wicked cheap early. For example, if you were able to buy a ticket from Paris to Avignon at the station, it will exceed $100/person easily, but on there it'll be like $30/person. super cool. Provence is the shit, too, and cheap there via scooter. Great sites and food and everything. Whether you come into France via Spain or from the North, go to Provence!
If you take the ferry anywhere in Greece (to like the Cyclades - Mykonos, Santorini, etc.) those are usually very cheap, like 10 euro/person. If you go from Italy to Greece, just get deck fare (check out http://www.bluestarferries.com
for both in Greece and Italy-Greece ferries) and then sleep inside on a couch or something. Really comforatble. Just allow enough time to get to whatever port you're trying to get to (such as Bari or Brindisi). And just keep in consideration, if you are going to arrive in Patras, get to the train station early and be the first one on board the train, otherwise youre sitting on a floor in a hot ass slow train with no breeze, and more importantly, no view. In general, Greece is awesome.
As somebody mentioned, avoid staying in London for too long. Its wicked expensive for just about anything. And same with Switzerland. But Travelodge UK has a sick pre buy thing online where you can get super cheap rooms (at least for London) right in the city.
And a couple have mentioned Camping michaelangelo in Florence. Super sick place. Great view of the city, good food and drinks. Inexpensive as the city goes, comforatable tent thing available. And at least from my experience, to save money, "hostels" arent always the cheapest route to go, infact, they can be horrendously expensive.
Spain is rad. The coast, however, isn't all the grand, at least to me. The real good shit is generally inland (granada, cordoba, seville, etc).