Do visit Arturo Barros E Sousa in Funchal (traditional methods of making madeira) and the Madeira Wine Lodge for a tour (following that with a visit to the vintage tasting room).
If you can, spend at least 2 nights well outside of Funchal, thus splitting your time. You can try the Pousada dos Vinhaticos (also serves nice cuisine by a cozy fire) on the old road between Ribeira Brava and Sao Vicente, in the midst of the Serra de Agua. There is also the oceanfront hotel/restaurant Residencial Calhau in Porto Moniz where you can get a room on the lower level with HUGE terrace (I'm guessing something like 25 feet deep by 15 feet wide) extending directly on the ocean and amazing lava pools... (basic in terms of decor but it's really about the location/view when you have the right room, and the food actually was very good when I was there). You can also try Casa das Videiras in Seixal (somewhat luxury B&B type place) in Seixal, if it is still open -
http://www.casa-das-videiras.com, but it does not have a head-on view like the place in Porto Moniz.
Whether or not you stay outside of Funchal for a night, you will want to have a car and tour around and at least visit the northwest coast between Sao Vicente and Porto Moniz (and, with caution, do take the old road for the best experience rather than the swiss cheese fast tunnel - it is all about scenery); if you can, also lunch up in Chao Ribeira above Seixal - good espetata and they also make their own table wine; on the way back to Funchal I highly recommend Ponto do Pargo for a rest stop (basically SW-most area of the island) which has an amazing and peaceful viewpoint area on a high cliff, and you are likely to see a cow grazing a bit too close to the precipitous edge.... I would also recommend a visit to Encumeada (also between Ribeira Brava and Sao Vicente), which has very nice hiking trails (and you can see both ocean on both the north and south coasts from there) and levadas that you can follow for a superb perspective of the central mountains. You can also drive up to Pico do Arieiro area, but as of 2 years ago at least, the pousada there was closed so it is more like a rest stop with a very basic gift shop (perhaps someone has an update on status here?). It feels very much like you are on a moonscape up there. Santana is also nice and Faial. But definitely do try to spend some of your overnights out in the country with day trips for an unforgettable experience.
I will try to post some photos when I get home.
Heather
