Which is the better way to travel between these cities--most scenic and enjoyable? reservation needed? Any helpful hints?
How long will it take?
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Washington DC
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The bus is much faster, taking 1 hr. 20 min. I don't know anything about making reservations, though I occasionally have seen a Spanish bus marked "full". I've linked to a website showing the ALSA schedule. Lurraldebus also plies that route, so you have lots of departure options.
The Euskotren is far slower, taking 2 hr. 35 min. It takes a very scenic route, and it's worth traveling that way if you have the time. The train carriages have a regional-train feel--meaning they are not terribly comfortable. I cannot say how bus scenery compares to the train scenery.
The train schedule shows hourly departures during the bulk of the day. ("Donostia" is the Basque name for San Sebastian.) Be sure you go to the right train station.
The bus station in Bilbao isn't particularly close to either the Guggenheim or the Casco Viejo (historic center), though I walked back and forth several times. There is tram or bus service. The Atxuri train station is quite close to the historic area but not near the Guggenheim.