Cape Town?

We are considering a 2 week holiday in Cape Town. We think we might go from
5th October this year.

So, what are the things we "must do"?

We are taking a flight only from Uk and we will require budget accomodation - possibly self catering. Any tips on good places/areas to stay?

Any help would be good.

This is absolutely the best resource for planning a trip to South Africa. In my experience, you can be positive that B&B accommodations will be well maintained and spotlessly clean. The price will be higher for newer and better located places, but all price levels are probably going to be better than you might expect.
http://www.cbel.com/south_africa/

You should consider going a couple of hours east of Cape Town to see the southern right whales that are there from June till December.
It is the most spectacular whale viewing in the world! My close friends, the Kotzes, operate a B&B right on the water in De Kelders, just next to Gansbaai. http://www.dekelders.co.za/
Prices are mid-range. Wonderful to have breakfast on their deck with whales only a few hundred meters away from you.

If your budget will allow, go out with another close friend, Captain Rudy Hughes, who has the only permit for boat-based whale watching there. http://www.whaleviewing.co.za/
Rudy will have his newer, larger boat by the time you get there.. cost is 600 rand p.p., slightly less for children. It is a once-in-a-lifetime experience.

Thanks to you both for such full replies. We will now start planning.