If you end up in Europe, I second the Cinque Terre idea, awesome place. London for the olympics also sounds like a blast, but you better book your hostel now, or plan to fork over some serious cash for a room.
Another option, if you are looking to relax on a beach, space-a to Hawaii from Travis and stay at Camp Bellows (cheap!)
If Asia is your thing, I highly recommend a tour of Vietnam. I once did Hanoi, Da Nang, Hoi An, and Ho Chi Minh City in a week. Some very interesting things to see there. The infamous Hanoi Hilton still stands as a museum; you can tour the Cu Chi tunnels outside of Saigon; take a boat ride in the Mekong delta while rocking out to CCR; have an awesome suit made in Hoi An. All in all, a very cheap vacation, great weather, hospitable people, and some sobering moments of experiencing rarely visited American military history. Also, Vietnam airlines is gov't subsidized, so you can fly between Hanoi, Da Nang, Ho Chi Minh and other Asian capitals cheaply. I was in Bangkok, and flew that round trip, starting and ending in Bangkok, for somewhere in the ballpark of $300-$400. Decent hotels run you about $40 a night, and meals are maybe $10-$12 if you go all out with appetizers, main course, and several beers.