We really enjoyed Prague. Even though it is not a small town, it is lovely. You can take the train from Prague to Vienna, rent a car and then head down to Hallstatt and Zell am See. Both are lovely small Austrian towns with plenty of outdoor activities. I am not familiar with Slovenia so cannot comment.

You could consider;

Prague
Cesky Krumlov
Vienna (take the Wachau Valley into Vienna, maybe cruising the Danube from Melk to Durenstein and then to Vienna)
Graz,
Klagenfurt, (visit Lake Bled on the way to Ljubljana)
Ljubljana

You could rent a car leaving Vienna and enjoy the drive all the way to Klagenfurt, using the car to also visit Lake Bled before returning it in Klagenfurt and taking the train to Ljubljana. Having a car would allow you to get to some hiking and biking spots in southern Austria more easily than using public transportation.

you have to go to Bled and there are some good hiking trails around. Some of the best walking is up in the north west corner of the country in the national park, good bus services from Ljubljana (nice little city, worth a days walk around)

Thanks so much. These are great suggestions! Sounds like we should definitely rent a car over taking the train.

We did a very similar trip last year - see details and pictures here http://www.fodors.com/community/europe/a-heat-wave-rain-and-some-nice-weather-in-between-a-wonderful-trip.cfm

It was not our first trip to Austria - we had seen Vienna and Salzburg before.

If I had to do it again, I would probably take the day in Cesky Krumlov (although we loved the little town) and add it to Ljubljana, which is a beatiful town. But we had great weather in CK and pouring rain in Ljubljana, so for us, what we had worked well.

I vote for renting a car, too. Make sure you get the proper vignettes.

We loved Ljubljana and did not make it to Lake Bled which I regret. It sounds beautiful. Ljubljana is a great size of town. Easy to navigate but lots of cute shops/ nice restaurants and a great city park. You could spend 2-3 days there depending on your interests. Not any "sights" per se just a lovely town. Kind of nice not to have to see anything and just wander about. I assume you are going in the summer. We enjoyed Vienna but the centre was very crowded and touristed (at Christmas). Not sure what it is like in the summer but there will likely be lots of outdoor concerts etc which would be very nice.

Thank you again - I'm just getting around to booking our hotels and will definitely be booking a car based on everyone's suggestions. I will post our trip details once I have them figured out. I can't tell you how helpful everyone's suggestions are! We are going in May - so hopefully we will have some nice weather!