Re the Oyster card - if you're in london for a week, it would be cheaper to buy a weekly ticket rather than pay for each trip. I think they charge a deposit for the Oyster card, but you get it back when you hand the card back. If you're going to travel further out than your hotel a few times, might be worth calculating if it's cheaper to buy the weekly for all the required zones.
Re places to see, the suggestions above are all good. We just had the in-laws over and they really enjoyed Marylebone High Street which is very central and lots of lots of nice shops and places to eat - very yummy mummy, so think arty/organic.
If you're a bit of a culture vulture, you should check out the V&A and the Natural History Museum (next to each other in Knightsbridge) and the British Museum (near Tottenham Court Road) - they're all free entry and you could spend a week in each. The National Portrait Gallery is also worth a look. If you're into things military you could be really brave and head south of the river to check out the Imperial War Museum.
The South Bank Centre could also be worth a look - there's usually (free) things happening around there, plus there's a very pleasant walk along the river bank.
If you're up for going a little further afield, Eton and Windsor are very pretty and not too far from the centre of town.
I keep thinking of more and more stuff - I'm going to stop now ..
Re food: kinda depends on what you like and your budget. You have to try our national dish, which is I believe is now officially Chicken Tikka Massala

If you're going to be near Kingston or Ealing, find Monty's and order the Butter Chicken - to die for.
I would check out TripAdvisor (and similar) for specific resto / hotel recommendations. We used it in Spain recently and - sticking to the top 10 most recommended - it did a real good job.
Finally, if you're into salsa you have to go to SOS .. but if you're into salsa, you know that already
