first of all, I'd have to agree that money is an issue cuz the dollar sucks right now. Now that I've said that. you can get a cheap train ticket from downtown london to downtown paris on Eurostar.com
You can look at flights but remember that you have to pay for transportation from city centre to airport and vice versa. If you book far enough in advance, the train is a good bet.
From Paris to Madrid I'd take the train too. you can take an overnight train from Paris to Barcelona, spend a day in Barcelona, and then take an overnight train to Madrid. then you can go farther south while only losing one day of travel time.
And by the way.....I'd recommend getting rid of the Faro and Lisbon part and spending that time in Barcelona and or Toledo or Segovia. Toloedo and Segovia are each a 3/4 day trip from Madrid and Barcelona is definitely worth the extra day or two. I guarantee that you won't regret it. If you want pics to prove it, let me know.
If you need any help or have any questions, lemme know