Hi Binky,
Im half Polish and have a family home in Krakow. It's an amazing city, packed full of things to do, good choice!
This web site will give you a good idea of things to do and where to stay:
http://www.cracow-life.com/
I answered a question yesterday suggesting it's a great place to visit, have a look:
http://www.theanswerbank.co.uk/Travel/Question 288159.html
I would highly reccomend visiting the castle in the centre of Krakow, (make sure you find the dragons cave) the cloth hall, the market square, the jewish quarter, the salt mines @ Wieliczka (check it is open first, sometimes it floods) and the jewish quater.
Restaurants: make sure you go to Chlopske Jadlo just off the main square (but book, it's small and it gets really busy). It's traditional Polish food (all menus are avalible in English) and the decor of the place is phenomenal.
Krakow itself is not huge, so you can walk about and generally get to everything, taking in some amazing sights along the way.
There is nothing really that expensive in Krakow, the food is cheap, the alcohol is REALLY cheap, even the tourist traps are quite cheap. Depending on what you like there are loads of really nice funky bars hidden around the main market square, and loads of bars underground, student bars, more relaxed jazz bars, poets bars. As it has a huge student population there are more bars in Krakow than in any other Europena city, and most stay open long past bed time.
Any more questions you might have just ask.
Have a lovely time x