We are arriving in Milan for a one day layover before going to Spain on the Saturday before Easter. Can anyone suggest a place to stay convienent to shopping and dining AND under $200 a night? Any suggestions on something else to do for the 25 hrs we'll be there?

Suggestion for something to do: See the Last Supper. You will need reservations. We stayed at the Milan Hilton, but that is likely to be more than $200/nt.

We stayed at the Hotel Gritti, which has a fabulous location (just steps from the Duomo . . . and Peck!), and is well under your budget. A pretty basic room, but appropriate for Italy for the price. I would definitely stay there again.

The hotel Spardari is in the dead center of the city and a popular one. Might be able to find a room there.
Go see marieb's post about a driver. I gave her details about eating a nice lunch with a view in Piazza Duomo. You could go on foot from your hotel and walk around Duomo (and inside) and go shopping in the Corso Vittorio Emanuele. At the end of this street you have to veer left to get to via Montanapaleone and via Della Spiga for the big names (Prada, Versace, etc.)
For cool drinks before dinner, jump in a taxi or metro to the Sheraton Hotel Diana (might check out the rooms here too), for a very cool gardern with white tents, ponds, and flowers. Dress the part though. Hip and cool, no tennis shoes, but you'll feel in the center of the action.
What do you want to do for dinner? Let me know and I'll try to help out.
Ciao,
Melissa

Definitely visit Peck. What Dean & DeLuca wants to be. For the best dinner its Boccodivino.