Trip to Murren & Luzern/ railway pass or not?

Although I'd agree that Luzern is a lovely city and well worth visiting, I'd recommend that after/before Murren, stay elsewhere in the Bernese Oberland for the other 2 nights, either in Lauterbrunnen or Grindelwald to see the other side of the valley, and also because they have better access to trains out of the area for a daytrip - eg to Bern, which can be seen in a day, or Ballenberg museum of Swiss architecture, life and crafts, at the end of lake Brienz. If you wanted to spend the 2 days somewhere else entirely, why not Zermatt?

Can't say I've seen many Swiss cities properly (apart from Luzern), but IMO you don't go to Switzerland, a land of majestic mountains, glaciers and turquoise lakes, for the cities! That said, Rick Steves says in his book that for a 7 day trip, B.O. 3 nights, Luzern 2 nights, Bern and Lausanne 2 nights split between - they're not far apart. Don't bother with visiting Geneva, it's rather dull.

Make sure you take the train from Interlaken to Luzern - a beautiful scenic route passing lakes, mountains and valley towns with picturesque churches. As to tickets/passes, check your fares on sbb.ch and see whether it adds up to as much as a Swiss flexi pass (3/4/8/15 days within a month). Other options are the Half fare card at 120chf - a month of half price travel, you can also get this half price when you buy a flexi pass, for use outside of your free travel days. I'm going from Geneva-Murren-Bern-Zermatt-Geneva this summer, and getting a half fare card. It's also great for mountain trains/cable cars etc.

A Swiss Half Fare card is usually the best deal monetarily. If you take the expensive trip to the Jungfrau during your stay in the Murren area then the Half Fare Card will save you 50% on that expensive trip and that savings alone will just about pay for the the Half Fare card. With the HFC every trip you take will be 50% discount. A Swiss Pass is vastly more expensive and allows you to jump on any train any time for as long as you want...usually an overkill. If you don't want to do the mind numbing math then just get the HFC and be done with it and enjoy your time in Switzerland. It will be great!

The main benefit of the half fare card is that there are no "off" days - it works for a month, solid, unlike the Swiss flexi pass where you have to use a travel day to get the discount on ships and mountain lifts

Thank you all of you for giving us suggestions. We took your advice on staying in Lausanne, Bern, Murren, Lauterbrunner, and Luzern. We want to buy a Half Price Card but I have additional questions:
1. Where can I buy a Half Price Card? Do my husband and I each need one? How early can we buy them?
2. After we get a Half Price Card, how do I use it when I buy train tickets on line?
3. We will be there early August. How early can we buy train tickets?
4. Where can I find point to point ticket prices? Any advantages for early booking?
5. What do IC or IR trains stand for? Which train costs more?

Thank you in advance for any questions you can answer,

You can buy the HFC at any Swiss Rail station or at a place like this:

http://www.swisstravelsystem.com/en/passes/swiss-half-fare-card.html

Both you and your spouse will need one. With your HFC in hand you will purchase your ticket from any Swiss Rail Station, show your HFC, and then you will pay exactly 1/2 price for any ticket. If you purchase online at www.sbb.ch/en there will be a place for you to supply any discount cards you may have (HFC) and then the displayed price will be 1/2 for you to purchase.

Thank you, Tim, for answering my questions. Does that mean we can buy train tickets on the day we travel? Does Half Fare Card also gives 50% discount on gondola, cable cars?

Yes, most of the popular lifts and cog-rail trains recognize the Half Fare Card. Check out the map by clicking on the "Map of Validity" on the right hand side of this page.
http://www.sbb.ch/en/leisure-holidays/holidays--short-breaks-in-switzerland/swisstravelsystem/swiss-travel-pass.html

IR is InterRegio, a train that goes fairly swiftly from region to region, while IC is InterCity, making few or no stops between city centres. You don't pay for the train, but for the journey, so there's no difference in price (not sure this applies on scenic journeys like Glacier Express etc); For more info on train types, see this page.

Train tickets can't be bought very early at all, about two months ahead I think. Also if you want a reserved seat, that carries an extra charge. To my knowledge, there are no discounts for early booking, and I know that you don't get a better price online than you do buying at the station before boarding the train (except for special price online only fares, marked by a red % sign, but you can't use your half fare card with those). This gives you the freedom to just turn up at the station, buy a ticket and go when you want to, instead of being locked in to a certain time that you have to travel, or waste your fare. A lot less pressure!

Lastly, you don't necessarily need to stay in both Lausanne and Bern, they are just an hour and 6 minutes apart, so easily daytripable from each other. Best to make your base in one to save moving your cases. You could even do Bern on route from Luzern to Lausanne, and leave your bags in a station locker, then head to Lausanne for your hotel in the late afternoon/evening.

Yes, the HFC works on trains, buses, boats, gondolas, funiculars, special scenic trains like the Glacier Express and Golden Pass and even the local city trams. It really is a good pass.

Thank you everyone for sharing your knowledge and ideas with me.:) I want to ask something unrelated to this topic: Between Lausanne and Luzern, any cities besides Bern are worth a visit? I just cancelled the reservation in Bern and added the third day to Lausanne.

I hear Basel is nice, though Rick Steves doesn't have it in his guidebook. Zurich a little more to the east of Luzern perhaps?
Or Montreaux, the Swiss Riviera, although whether there's much difference to Lausanne I don't know. Bern is still worth a visit, if not a stay.