Those prices from Shanghai to HK seems a little steep, have a look at DragonAir, you can usually do that trip for less than 200GBP.
Get an Octopus card, the travel information desk at arrivals will give you one, it's only 50HKD deposit plus whatever you charge it with. You can use it on all trains, buses, minibuses, convenience stores (7-11 etc), supermarkets.
Kowloon or Hong Kong better? Well I've been in Kowloon for 2 1/2 years, and am in the process of moving to the island, they are both different and interesting in their own ways. Kowloon has a lot more of a local flavour, while in certain places on the island you can be forgiven for thinking you've stumbled into a Western city.
Don't worry about the language, most of the people you meet will speak very good english. You might get the odd taxi driver who is challenging, but just make sure you have a business card from the hotel, or a guide book you can point at and you'll be fine.
The MTR is a super cheap, clean, reliable and efficient way to get about town. If you want to see more, hop on a bus. USe Google Maps to plan a route, the public transport option lists all the bus stops, bus numbers etc.
Don't worry about getting lost, it's impossible to end up in 'the wrong part of town', as there really isn't one. It's a very safe city. I have heard of some pick-pocket trouble around Mong Kok, but never experienced any crime here.
Here's an 'alternative' and more interesting list of attractions to go to than the usual tourist traps.
Braemar Hill - Best viewpoint to take in the city, much nicer than the horrible, ripoff tourist trap that is The Peak. You can sit and watch the sun set over Victoria Harbour in between the ICC and IFC towers. Takes a little local knowledge to get to, but I would be happy to show you if I'm free!
Lion Rock is also worth doing, although it does involve a decent slog up a mountain side, depends how active you want to be.
Wet Markets - Definitely visit one of these, they are scattered around the city, full of interesting sights and sounds. The top floor usually has a cooked food area where you can get stuck into some real authentic local food for peanuts.
Tai O - OK it is fairly touristy, but it's a lovely place to be around sunset, and the boat trips to go see the pink dolphins are worth doing.
Mong Kok - Walk from the Ladies Market up to Flower Market Street, via the fish market. Some great shots of red-top minibuses and busy streets..
Get a nice meal with a view. I would recommend Nanhai Number 1, rather than some of the more trendy spots. Great Michelin star chinese food and one of the best views of the harbour.
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A scoot up the mid-levels escalator is worth doing, interesting way to see Soho, even though the place is full of Westerners, lots of different restaurants. If you fancy a taste of home, The Globe on Graham Street is as close to a British pub as you'll find, and next door is a tiny little Sichuan restaurant called Chili Fagara, which is a must visit if you like your food spicy.
The back streets of Wan Chai around Star Street are full of interesting art galleries, graffiti and curio shops.
Tai Hang (my new neighbourhood) is a lovely little area of low-rise blocks, with trendy little cafes alongside car workshops and ramen joints.
Kowloon City is interesting if you want to get off the beaten track a bit! A lot of good Thai food in the area, very local, one of the few places you might have language trouble.
If you want to get a bit of a hike in, head to Sai Kung. Hop in a taxi to Sai Wan pavillion, then you have a 40 minute walk in the countryside until you get to the best beaches in Hong Kong. There are some simple food places on the beach and you can catch a speedboat ride straight back to Sai Kung. On the subject of beaches, I would avoid going in the water anywhere but Sai Kung. It's pretty filthy anywhere near the Pearl River estuary.
Definitely get to the Races. Wednesday night in Happy Valley, Sunday in Sha Tin. Both a good day out, Happy Valley a bit more tourist friendly, whereas Sha Tin is more about serious gamblers.
If you head up to Sha Tin/Tai Wai/Fo Tan way, go for a stroll along the waterfront. Lovely bit of town.
Shek O, Stanley, Repulse Bay, Mui Wo, Clearwater Bay, South Bay all good beach spots. Stanley has a market and a few seafront restaurants/bars.
If I were to pick a spot to stay, it would be in Tsim Sha Tsui. You're in the center of everything, have the harbourfront view on your doorstep, and are only a few MTR stops or a ferry ride away from getting pretty much anywhere.
Getting from Airport to Kowloon/HK Island, I would go either Airport Express (90 HKD), or Taxi (200+ depending on where you go to).