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EuroTrip Help. Trains or Planes?

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My two friends and I will be traveling to Europe from June 21 through July 26...
We plan to go from London to Amsterdam to Berlin to Munich to Brussels to Nice to Madrid to Barcelona and then back to London.
I'm just wondering whether or not to fly domestically to and from all these places, or to get a Eurail pass? I see pros and cons with both forms or transportation...
I know flying can be a hassle with airport security and baggage fees and what not, but it also saves a lot of time.
And as for the train, it's more time consuming, but fairly easy to get around with.....I just have no clue what pass would even accommodate all those places.
We're on a budget of $3000 - with 500 of that being for travel....

I'm open to suggestions for a change in the itinerary...
The only 'sure thing' about this trip is London and Amsterdam and Spain towards the end. Everything in the middle is pretty open to change.

Thanks!

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