Europe in August is a double-edged sword. The entire continent takes this month off for holidays, etc. Depending on where you go, you may be confronted with packed trains, no hostel beds, lineups in restaurants, etc. The big central European cities like Berlin, Prague, Vienna, Budapest, will be busy, but should be able to cope. The further south you go, the busier it is likely to be.
For what it's worth, Northern Europe is fantastic in August. Lots of Scandinavians are in Spain, Italy and Greece and the weather is as good as it can get there. Expensive I know, but there are few places in Europe nowadays that are not expensive.
Throwing in a few places that are not on the main Eurail line will ensure that you have a nice mix of "busyness" and some tranquility. There are lots of nice areas near to where you are referring and the best of Europe is not always found in it's cities.
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