Assuming you're staying in hostels most the people you'll be talking to will probably be English speakers anyway (Australians, Canadians, British, etc.). Remember English is the global language, although in Spain the global language is more geared towards Spanish, since they have different languages within the country and South Americans/Italians.
In being in tourist locations there will mainly be other tourists - you'll prob meet more aussies than anyone else! If you want to see the culture more - go to the smaller towns and cities and you'll find it's much more like the traditional country, best way to do this would probably be to team up with someone and hire a car. They'll also be much more friendly and interested in you.
As for when you're taking to locals, what I did was learn hello, thank you, something to suggest you don't speak the local language (my blood is European so I had the problem of people thinking I speak the local language!), and do you speak english?
eg. French: Bonjour (Hello), Merci (Thank you), Je ne compron pas (I don't understand), parle vous Anglais (do you speak English)?
Start with those, then you might wanna also learn a few numbers so you know how much cash you need to pay for whatever you're buying. Buy a small phrasebook if you're spending a couple weeks in a certain language. If you're open to it you'll be surprised how much you learn by being in a country! Look at the pronounciation first so you can learn by reading (Spanish is kinda similar but French sounds really different when it's read).
Oh and in Germany/Netherlands/Switzerland/Scandanavia they can speak better English than a lot of native English speakers :P
As for places to go I really enjoyed the following:
Spain - Seville, Granada, Barcelona
France - Paris, Nice (Monaco), Millau area
Germany - Berlin, Munich
Switzerland - Bern, Interlaken (Grindelwald), most of the country is very beautiful though.
Italy - didn't have much time here but enjoyed Rome
UK - London, Edinburgh (really underestimated in my opinion!), try get to the country in Ireland/Scotland too!
Amsterdam (not just the red light district, it's a beautiful place!)
Hope that helps a bit. I just did a similar thing in going to Europe for about 5 months on my own this year.
Erik
[ Edit: Edited on Oct 24, 2008, at 8:30 PM by Erik85 ]