1. Def. fly from Lima to Cuzco. TAM is a lot cheaper than LAN.
2. Two cool choices for nice, tourist class hotels: Hostal El Patio in Lima (Miraflores) and Hotel Casona Les Pleiades in Cuzco. A lot of places prefer cash to credit cards.
3. If you're hiking into Machu Picchu, book as soon as you can to reserve a spot on the Inca trail. If you miss out, the Salcantay Trek is a decent alternative. It goes higher than the Inca Trail, so take along oxygen shots (available at any pharmacy in Cuzco).
4. Eat alpaca kabobs at PachaPapa in Cuzco. The food is very good and reasonable everywhere in Peru. Don't drink the water.
5. The ruins in the Sacred Valley (Pisac and Ollantaytambo) are nearly impressive as Machu Picchu -- though they lack as spectacular a setting.
6. At Machu Picchu, make sure you arrive very early and get a pass to climb Wayna Picchu -- that's the humpy little mountain you see in the background in all the photos. You'll be happy you made the effort.
7. Reward yourself with a soak in the hot springs at Agua Calientes. The water is a little murky, and it's more lukewarm than hot, but it still feels good.
8. In Cuzco, South Adventure Peru Tours (Calle Carmen Bajo 235) was terrific at setting up excursions. The owner/operator, Ruben, is very personable. He even gave me a big hug when he picked me up at the train station upon my return from Machu Picchu. You'll find lots of tour operators in Cuzco to get you wherever, and they all seem to funnel into the same bus, but this guy did a lot for me for cheap. He gets lots of terrific notices on tripadvisor and other travel sites, so check him out.