I have been to Hokkaido once. I spent 6 days, visiting almost all the tourist spot location all around Hokkaido (Sapporo, Furano, Otaru and Hakodate)
(1) i can say that almost all the famous spot is accessible by train and bus. I use JR east 5 days ticket. So i saved a lot on my expenses.
(2) During our visit to Hokkaido, we only stayed at one youth hostel in sapporo. Everyday we went to other city and back to Sapporo to sleep..except our last city, Hakodate, since we are on our way back to Tokyo.
Read more about my my experience
here