I went interrailing for 2-3 weeks during summer 2010, it was the best thing I've ever done! We booked it so we spent 2 nights in the first and final cities, and 1 or 2 nights in all the middle ones. Sometimes we travelled by overnight train instead of forking out for a hotel - I'd absolutely do this again! It wasn't that difficult to sleep even if you weren't booked into a sleeping carriage, just a regular seat, since everyone else is keen on getting some sleep too. You get woken up by border control every now and then, but it's generally fine. Also, I think we survived the hectic schedule because we weren't going out drinking and spending all evening in bars and clubs - we usually got to sleep pretty early so we could spend the whole day sightseeing.
Itinerary: Dubrovnik - Budapest - Krakow - Warsaw - Berlin - Prague - Bratislava - Vienna - Munich
We planned it all out beforehand. First thing we did was see where the cheapest flight could take us (Dubrovnik) and bring us back from (Munich) - and then planned a route around that. We'd never seen any of eastern/central Europe before so weren't fussed about seeing particular places, just fitting as much in as possible! We booked all our accommodation online before we went, staying in a mixture of friends' apartments, hotels, youth hostels and guest houses. We tried not to stay in youth hostels two cities in a row, just in case one of them was awful and we hadn't managed to get a good nights' sleep! It worked out pretty well, and to be honest our favourite was an amazing guest house in Dubrovnik. The owner cooked us breakfast every morning and gave us fresh bread to take out with us during the day! We also meticulously planned travel times between cities. I made sure we had printed off timetables in case we missed a train or had any issues, but fortunately we didn't.
We ate a good mixture of nice restaurant food, cheap pub grub and supermarket meals. Supermarkets, especially the Polish ones, were generally a lot cheaper than in the UK and we'd always have a picnic lunch from a supermarket. Baguettes, meat, cheese and fresh fruit is easy to find wherever you are. Top tip - blueberries are insanely cheap and delicious in Poland! We'd try and eat out at an authentic restaurant at least once in each country, but sometimes we'd grab a cheap bottle of wine and a takeout pizza to enjoy back at our accommodation instead. We never used the cooking facilities in the youth hostels, as we weren't really in one place long enough to buy food to prepare ourselves.
Once we'd sorted out our route and accommodation, we got lots of guide books and checked out Wiki Travel and this forum for the best things to do in each city we visited. We also made the tourist information centre our first port of call in each destination, and filled out days with sightseeing! There wasn't a lot of time for anything else, although we did enjoy hanging out at the beaches, parks and river banks, chatting to the locals whenever possible and just trying to absorb as much of each different culture as possible.
I'd recommend keeping a diary and taking as many photos as possible, as when you're seeing so many different places they can easily all blur into one. I still enjoy reading over the diary I kept, it holds such fantastic memories. I'd love to go again one day!