Simplest way to get to Milan would be to fly there from Spain (but make sure flights go to Malpensa if you want to connect smaeday).
Two weeks is not very long to cover a huge peninsula full of wonderful and varied landscapes and churches and other architecture. In fact of course it's impossible so you will have to choose.
Holy Week up to Easter Sunday (which falls on 24thApril 2011) is celebrated particularly in Andalucia, which in any case is most like the traditional image of Spain(Flamenco etc). One idea, you could visit Lisbon and area, Seville and more of Andalucia and then Madrid and area. Or Lisbon, Madidid and then Barcelona.
The Michelin green guidebooks give star ratings for cities and sights and also suggested itineraries.Maybe that would be a good place to start looking. Americans love Rick Steves and he has a book Rick Steves' Spain and Portugal which would give you a much narrower selection of "highlights" to choose from than the Michelin does (so less of a headache to decide!) .
Flights fromLondon eg with Easyjet. To Milan from Spain: Easyjet or Vueling fly into Malpensa.
How does Easter week impact my trip? Does it mean I have more to see or many places closed?
"Holy Week" means Seville would be packed because of the processions; otherwise It's a week when lots of people take a break and hotels can get full but booking soon you'll have no problems.
In most of Spain Easter Sunday is the end of the holiday celebrations. In Catalonia Easter Monday is a public holiday, so shops shut. However it also means that somemuseums that shiut on Mondays normally are at least open in the morning.
En route from Lisbon to Madrid I can recommend visiting Evora, Estremoz, Elvas, Merida, Cáceres and Trujillo. Between Madrid and Barcelona, do stop in Zaragoza.
BUT....you do realise that picking up in Portugal and leaving the car in italy comes with a huge (several hundred euro) international drop-off fee?. Unless you are really determined on including the south of France in this trip (in your time--frame it makes the trip really rushed), the simplest/cheapest way to do it would be to drop the car in Elvas, get a bus (maybe even taxi?) to Badajoz and pick up another car in Spain then leave it in Barcelona and fly to Milan. Leaving it at Barcelona airport before you come into the city (airport is south of Barcelna) would be simpler too as car-parking in the city is expensive and you wouldn't use a car for sightseeing
Finally firmed up my redemption tickets. Latest plan is to fly in from Paris to Barcelona and pick up a rental car. We are thinking of going to Madrid, then Portugal on the inland route. Will take the coastal route via Gibraltar, Valencia and return car in Barcelona before flying to Milan to catch flight back to Hong Kong.
Would welcome any suggestions on interesting stop overs on the way. If we were to pick 1 or 2 coastal resorts, what would you recommend?
Adding Paris to your plans means less days in Spain. But how many are you reserving for Paris?
You should think carefully about your plans as the drives are very long. For example the drive between Barcelona and Madrid is about 700 km if you take the highways. That is all day. Then you want to se other locations too.
Cars are useless in cities.
The weather in April could be bad so this will also have an impact on your plans.
I still say slow down take lass travelling time to see some of the culture of Spain.
Yes, I read that car is a burden in cities. So how do we handle that? We will not be staying in city centres. Leave the car in the hotel and take train or buses?
Based on this routine, would really appreciate highlights of where to stay overnight andwhat to see in between these cities, Restaurants suggestions very welcome.
I don’t think you are getting the message. Have a look at a road planner and see how many km you wish to travel. The amount you want to cover is far too great.
When you see the travelling times do not forget they do not included stops for traffic jams, getting lost, meals coffee or visits to the WC.
Cut down on the distances and use public transport if you only want to see cities.
If you like churches I highly suggest you to come in Barcelona to visit the Sagrada Familia considered the master-work of renowned Spanish architect Antoni Gaudí. Even if the church is not finished, it is really impressive!
In Granada you have ti visit the Alhambra's Moorish palaces. I'm sure you'll fall in love with this architecture!
Then, in Sevilla you can visit the largest Gothic cathedral and the third-largest church in the world. It is very impressive!
Have a very nice trip!