Jennifer, we were there about 3 weeks ago. We stayed in Arcos and Ronda, and also drove the "route of he white hill towns" through Zahara and Grazalema.
Our favorites were easy -- no contest: we thought that Arcos was far and away the best, most "special" of the bunch. Definitely stay there (in the old town) overnight -- like noplace else. We also liked Ronda, but Arcos was more special (less touristy, at least at night). If I had to pick one, it would certainly be Arcos.
We stated at Casa Grabde in Arcos and loved it. In Ronda, we stayed at Hotel San Gabriel, and loved it too (neither were exactly cheap, but we felt like both were well worth it). Both are in the book.
Of course, forget bringing the car into the old town of Arcos (really, don't even think about it). We parked in a lot down below the new town and took a cab, and we were very, very glad we did. Ronda wasn't all that bad to drive through (to my surprise). The streets in Ronda were just standard, narrow streets like in any old European city. The "streets" in Arcos were impossibly narrow in many places. Leave the car down below and explore them on foot.
Have fun - I'm sure you will love it.