Hi Mike,
I came here from Paris by eurorail so I can help out a little.
First of all, and most importantly, the train services between Faro and Spain are not very good at all, so I would recommend getting a bus from Faro to Seville. It takes about 3 hours and is much better than the train (It is also reasonable at 14€ or so). If you chose the train route you would have to change at the portuguese/spanish border and take buses/ferries to get to the next train station...long story short, it is a hassle!
So, first stop, Seville. A beautiful city and lots of things to see and do (and a truly authentic taste of southern Spain).
From Seville, hop on the AVE high-speed train to Madrid. You are there in around 2.5 hours or so and the train is extremely comfortable.
Here comes the more complicated bit. You could either elect to stay a couple of nights in Madrid and then go on the overnight train to Paris (I did this and while it is not a 5 star hotel, it is comfortable).
The other option is to go to the north of Spain (Basque country) and stay a night or two in Bilbao...Guggenheim museum etc...or you could get the train to the Spanish/French border (again you will need to change trains here) and stay a night or two there at the foothills of the Pyrenees (Bay of Biscay side). If you could venture a little further up you would get to Bordeaux, one of many homes of French wine

. From Bordeaux you could get the TGV to Paris (journey should take only 2 or 3 hours).
My tips for cities would probably be Seville and Bordeaux - though the easiest would be to visit Seville and Madrid.
Hope this helps, if you need any other info just ask
useful train websites
www.renfe.es (Spanish but I think you can get it in English too)
www.voyages-sncf.fr (French and I don't think it is available in English)
www.b-rail.be (Belgian site that is available in English and has a comprehensive list of timetables and trains throughout Europe...just choose the international option)
Best,
Chris