Well it's been a long time since we did Europe (2004) and when we went we backpacked, so our budget probably was a bit different to your folks. But we worked on the basis of $150 AUD a day for both of us (included accom, food, activities, tours etc). We stayed in hostels, but always got a private room with a double bed and sometimes an ensuite (if we were lucky). We also bought Eurorail passes before we left so didn't really have to include getting from place to place within our budget. But the $150 a day generally worked for us, some days we went over and some days we were under. But I kept a tally each day of what we spent so we knew exactly where we were at cos our money had to last for three months of travel. With inflation, I'd say to do what we did now we would probably need $200 a day...

Where abouts are your parents? My DH is a travel agent so could help them plan everything if they wanted. If you're interested, just PM me.