best route for Spain and Portugal?

Are you using public transit, or are you driving? And where do you want to end up at the end? As far as train travel is concerned, the most efficient route would be Paris, San Sebastian and Madrid, then a circle of Granada, Sevilla, Salema (from Sevilla by bus or by bus and train, unfortunately), Lisbon, and back to Madrid (could also do this circle in reverse.) Then Madrid to Barcelona, and back out to your next destination. I suggest finishing in Barcelona because it has excellent air links to the states, and is also the best place in Spain to catch a discount airline flight to another European country.

One possibility might be:

Paris - San Seb (night train)
SanSeb - Lisbon (night train)
Lisbon - Salema
Salema - Seville
Seville - Granada

then either to Barcelona and then Madrid, or Madrid and then Barcelona, depending on where you want to end up. But, I think you'd probably be best off going to Madrid first--its a shorter haul from Granada. There is a great rail connection between Madrid and Barcelona.

I think you'll need to resort to buses in the Algarve.

You could do it other ways, but I think this route minimizes travel time, which is nonetheless extensive.

Thank you, I reworked my itinerary and it looks like Portugal will have to wait. I am using public transportation so whatever is most convenient as far as trains go will probably be my first choice. Barcelona will be my last stop in Spain before heading to Arles, France.

I was thinking of going to Granada really early, seeing the Alhambra, and returning to Seville in the evening instead of staying overnight...or should I stay the night to see more of the town?

For Granada: Stay overnight if you can. I actually think two nights is better, to allow a night visit to the Alhambra and time to explore the Albaicin. But here's a one-night whirlwind plan you might want to consider, if you are traveling in the shoulder season when the sun sets early enough.

Arrive late afternoon and catch the sunset view of the Alhambra from Plaza St. Nicholas in the Albaicin. Grab a quick bite to eat, which might be a picnic.

Take a cab (they are reasonable) to the Alhambra for a night visit of the Nasrim Palace, for which you have reserved a ticket in advance.

Return to the Alhambra the next day. You'll see the Nasrim Palace again, but it is really special at night.

Proceed to your next destination.

Your whole itinerary entails many long train tides to many far-flung destinations. I think you will be sick of trains before you are done. For this reason I recommend avoiding unnecessary doubling back, such as your day-trip plan.

You should stay overnight in Granada. Visit the Albaycin area for dinner and flamenco, and some great night-time views of the Alhambra. If you're cutting out Portugal, then your best bet is probably San Sebastian, Madrid, then Cordoba (optional) and Sevilla by hi-speed train. Then over to Granada (about 3 hours by bus or train). From Granada, book a cheap flight on Clickair (Spanish discount airline) to Barcelona. Otherwise, your train option will take up an entire day, or you'll have to book the overnight train. Tickets can be had for about 50 Euro, all in but, of course, the sooner you book, the cheaper the fare. If you do use Clickair, be careful of the checked box at the top of the page where it asks for "Travelers Information"." Uncheck this if you don't want to pay an extra 15 Euro for trip insurance.