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Help Needed on a 4/5 day trip to Machu Picchu

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Hi all,

For awhile I was set on booking this Gap Trip to go to Machu Picchu and it dawned on me I was paying over $549 for me and my wife to have someone book train tickets and a very likely cheap hotel for us. So I've decided against the Gap trip and have been debating on two options:

1. Do the trip on our own
or
2. Use "Peru for Less". I found out about them based off this post:
http://www.fodors.com/community/south-america/lots-of-photos-april-machu-picchusacred-valley-trip-report.cfm

We aren't fancy people but we don't want to stay in a crummy hotel. $100 a night would be ideal. Casa San Blas in Cuzco looked great to me (I saw this listed on the Peru for Less site. Here's a Trip Advisor link:
http://www.tripadvisor.com/Hotel_Review-g294314-d572501-Reviews-Casa_San_Blas-Cusco.html

I contacted Peru for Less just now and will wait to see what they come back with but I wanted to get ideas on a suggested itinerary for such a short trip and hotel recommendations. We are from the US but we will be coming from Rio de Jainero because we are doing 5-6 days there first. I am debating on doing an extra day in Rio vs. an extra day in Peru. Here is the itinerary I was thinking and I'd like some feedback on just the Peru part and if you think we should add the extra day in Rio or add it in Peru.

Day 1: Arrive at 9:15am in Rio - Free day to wander around and probably go to a beach and just hang out
Day 2: Rio - Downtown and historical districts, Sugar Loaf
Day 3: Rio - Corcovado mountain, enjoy more beaches
Day 4: Rio - Schooner ride around the various bays / swimming
Day 5: Rio - Nothing planned so we could fly to Cuzco on this day if we wanted to.
Day 6: Assuming we stick with Rio on Day 5, we fly to Cuzco this day and will be getting into Cuzco in the evening.
Day 7: Cuzco
Day 8: Sacred Valley/Ollantaytambo - do we stay overnight here?
Day 9: Aguas Calientes / Machu Picchu - Should we stay overnight here just in case we have bad weather and can try for Machu Picchu again on Day 10 or should we just head to Cuzco on this day and assume all will be fine and enjoy Cuzco some more on Day 10?
Day 10: Cuzco (or 2nd shot at Macchu Picchu and we would head back to Cuzco in the evening)
Day 11: Fly home - Leave Cuzco airport at 3:30pm so will have some time in the morning since it looks like the airport is very close to the city centre.

Obviously if we add the extra day in Peru it will be less hectic for the Peru portion, but we think Rio looks so amazing that we thought that was the best use of the day versus another extra day in Cuzco or the surrounding towns.

Thanks for any and all input! I'll go back to researching on my own now :)

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