Hostels aren't the end of the world. I stayed in one in Naples that was odd, but the guy was nice, let us use the internet for free and cooked for us. We had really good experiences with places that were called "camping" but were really just nice cabins, and Hostelworld.com lists hotels as well as hostels in the lower price ranges. I'm jealous though, I didn't get to travel nearly as much as I wanted to. Ireland and Scotland are the two I'm the angriest I missed out on.
As far as traveling in Italy, be careful in the south, especially Naples (I hear Rome can be wild too, but never got to go). I had someone try to pick my pocket twice and was attacked by a group of gypsy girls.

If you have long/blonde hair, wear it tied back. You will get hit on a lot in 90% of Italy, especially if you are blonde and obviously American. The northern areas are tamer but more expensive. Anyone who is in the business of dealing with tourists speaks at least rudimentry english. Venice is out of control expensive. None of the local bus systems anywhere are reliable or timely, the trains are usually better.
We always stole guides from the library at school so I couldn't tell you what to get, but definitely have a plan before you go anywhere. As far as tours and such go, they aren't such a bad idea in some places, (especially the really big touristy ones) backpacking and going on your own can be fun, but it can also be scary and overwhelming when there's just 2 of you in a foreign country and nobody around to help you out.
If you have any questions about specific things/places about Italy, let me know, I was there for 4 months.
PS: Malta should be amazing, I had friends that were there over spring break and looks gorgeous. The money deal there is kinda a pain though.