Spent seven weeks in South America and visited some spectacular places, particularly in Peru and Argentina.
We traveled independently until halfway through, when we met up with my Dad and a group of friends from his soccer team and joined their guided tour.
I remember the pictures of Machu Picchu from grade school, and it lived up to my high expectations. Though we missed out on the experience of hiking the Inca Trail to get there, we did the steep hike in the park up to Waynu Picchu. Breaktaking view of the archaelogical site below. This was on day 2, when we arrived at the park first thing in the morning at it's the least crowded. I recommend spending the night at the Sanctuary Lodge right outside the park, or in the nearby town of Agua Calientes/Machu Picchu Pueblo.
Cusco is a great town despite the hassles you'll encounter as a tourist (such as having dozen of kids trying to sell you postcards if you're near the main square). Lots of shopping, attractions (in town and nearby), and food alternatives. We enjoyed the outdoor market in the San Blas neighborhood. Also would recommend Jack's Cafe for gringo eats.
Make the day trip to tour the town and Inca ruins at Ollayatatambo. Other Trip Highlights: Iguazu Falls - vastly larger than Niagara Falls, we visited from the Argentina side (the park's also located in Brazil) and were impressed by the trails in the park and all of the incredible vistas around every turn.
Mendoza, Argentina - easy to find yourself spending extra time here, with all the great wine and food...highly recommend the food and tour at the nearby Escorihuela Winery.
Arequipa, Peru - an attractive city; for budget accommodations that work well for groups, stay at La Casa de mi Abuela - very convenient location and lots of common space. Visit the Monastery of Santa Catalina, and try the nearby Tacos y Tequila for lunch (Mexican). Arequipa is the gateway to visit Colca Canyon (if you're able to rally hours before dawn -- which we didn't).