This is a topic I can definitely speak to! I was born & raised in Flagstaff (my parents still live there) & my grandparents lived in Sedona. So, here's my take on both areas.
Sedona - Sedona is a gorgeous, very spiritual town. There is tons of hiking & lots of shops to buy Native American jewelry, pots, kachinas, etc. The Pink Jeep tours are a fun thing to do to tour the town. The scenery is all red rock with some shrub-like trees. It will be fairly crowded at that time of year since the weather is getting warm. It will be warmer in Sedona than in Flgstaff. Oak Creek Canyon is a heavily wooded area where the road winds through the canyon to Flagstaff. Although it is a short distance, it can be a lengthy drive with the traffic. We used to drive to my grandparents & it took about 45 minutes to get there. The drive through the switchbacks was about 30 of that. Sedona is a short drive to the scenic areas another poster listed (Jerome, Montezuma Castle/Well), etc. It is definitely more of a tourist town & has a more concentrated area of shopping/dining. Tlaquepaque is a neat arts/crafty area in Sedona to see. The center of the spiritual world is also in Sedona. Expect to see lots of crystals for sale in the shops
Flagstaff - Flagstaff is definitely a college town. The downtown area is very "earthy" & filled with lots of shops where you can find most of the same stuff you can find in the Sedona shops (minus the crystals). It is a mountain town as opposed to a desertish/red rock area. Lots of pine/oak trees & aspens are not too far away. There is lots of hiking & lots to do for day trips. The Canyon is 90 minutes away via auto, but you can also drive to Williams & take the train to the canyon. My DH & I get lots of questions about what to do in Flagstaff, so we pulled together a list of stuff within a short distance. I'll paste in in below.
Personally, I would stay in Flagstaff. It is right off 2 freeways & the day trips to anywhere (including Sedona & Jerome) are more convenient. The switchback drive is a great one to take, but I wouldn't want it to be my commuter road. MOst of the timeshares in Flagstaff are by the country club & that is super convenient to I-40. If you are looking to settle in one place & hang out at the timeshare without trying to "do" alot, then Sedona would be a good choice. If you plan on trying to see as much as you can while in N AZ, Flagstaff would be a good bet.
Here's the list of stuff to do in Flag. Feel free to ask me any questions about any of this stuff & I'll do my best to answer!!
There are 3 National Monuments just outside of Flagstaff
Sunset Crater Volcano National Monument -
http://www.nps.gov/sucr
Walnut Canyon National Monument -
http://www.nps.gov/waca
Wupatki National Monument -
http://www.nps.gov/wupa
Lowell Observatory - Where Pluto ws discovered -
http://www.lowell.edu
Meteor Crater -
http://www.meteorcrater.com
Museum of Northern AZ -
http://www.musnaz.org
Snowbowl Scenic Skyride -
http://www.arizonasnowbowl.com - This doesn't open until Memorial Day weekend.
Might find more info at
http://www.flagstaffarizona.org
Beaver Street Brewery - 11 S Beaver (1 blk S. of visitors center) - Good Wood-fired pizzas
Mike & Ronda's - 21 S Milton (on main drag just S. of overpass) - Great big breakfast for cheap
Grand Canyon Deer Farm (petting zoo - definitely for kids) -
http://www.deerfarm.com/
Lava River Cave -
http://www.fs.fed.us/r3/coconino/volcanic/lava_special.html
http://home.att.net/~whitethorn.house/lavariver.htm
Grand Falls -
http://www.primenet.com/~steved/bin/photo/photo10.html
http://ag.arizona.edu/AZWATER/reference/gauges/ltlcolo1.html
http://az.waterdata.usgs.gov/nwis/current/?type=flow
Grand Cayon Railway -
www.thetrain.com
Verde Canyon Railroad -
www.verdecanyonrr.com