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Spain, Portugal & Morocco on a shoestring!

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Hey everyone,
Looking at a trip to Europe in September, hoping to see a bit of Spain, Portugal & Morocco.
Will be a bit pressed for time as we have 2 weeks, but are realistic and know we can't hope to see everything there is to see.
Rough itinerary:
Fly to Barcelona from Perth, West Australia.
Make out way down to Madrid.
Keep going down until we get to the coast and skip over to Tangier, Morocco.
Finish up in Portugal and fly to London.
We plan to backpack and stay in hostels, will be using busses & trains including overnight trips.
Don't want to cram 2 months worth of travel into 2 weeks, we want to pick a few things/places we would love to go to and be happy with that.
Any thoughts/ideas/ experiences on must do/see's and suggestions on length of time in each place and info on transport/hostels would be very much appreciated!

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