Hope this helps. Buñol (don't think you'll see the n with the ~ on top) is pronounced Bugnol and it is indeed close to Valencia, and is on a highway connecting Madrid and Valencia.
On your choice of hotels, bear in mind that those on the coast will be full of tourists (they get 100% occupancy), so book in advance.
Pepe and Mandoble may persuade you to go to Madrid, but don't!

It's awfully hot on summer, and the mediterranean coast is a much nicer place to stay. If you have a week to spend in Spain, you can drive or take the train up to Barcelona, which is a very nice city (not because it's my city

) with the Gaudi buildings and its gothic quartier... and it's on the coast, so you can go to the beach as well

If you do come, be sure to send me an e-mail, I can take you on a sightseeing tour of the coast on a Cessna 172.
BTW, bring extra clothes... those you use in the Tomatina won't be of any use after it's over

Daniel