It sounds like your best route is to take US 26 all the way from Portland to the Idaho border and skip the freeway. That is all good road and generally well maintained, and it is very scenic. (Of course parts of the freeway drive are also quite scenic and very different from US 26.)
I'd say late afternoon, early evening is a good time to see the Painted Hills. As with any landscape location, weather is a big variable.
Prineville or John Day are the best places to find a motel--there are a couple decent choices in each town. The Painted Hills area is one unit of the John Day Fossil Beds Nat'l Monument--on their website there are links for lodging.
There is lots to see along US 26 and/or within a very short drive away from the highway. Mount Hood is right along the way and you could drive up to Timberline Lodge for a close look. A short drive down US 97 to Terrebonne will take you to Smith Rock State Park which is definitely worth a visit. North of Mitchell is the town of Condon with open wheat fields and dramatic views of wind turbines (which I think are pretty cool photo subjects). To the south is Juniper Hills, a conservation area owned by the Nature Conservancy which is very similar to Painted Hills in appearance. As you go further east, a detour through the old gold mining country west of Baker City can be interesting but this is probably not the best time of year for that.