how large is your group?
Can you give us an idea of how big your group would be?
For location, were you thinking of something very central as in downtown Florence? or would something a bit outside of the center be ok as well?
What you describe sounds like a party - and if you want a live band you'll certainly need a venue that has a stage and maybe even soundproof to the exterior. One of the night clubs downtown might be appropriate, maybe even a hotel with a hall but there aren't that many in "downtown" Florence as space is limited.
Give us an idea of the size of your group and it should be easier to come up with some suggestions for venues.
As for what to do on your free days, you'll see Florence is practically an open-air museum so you'll be sightseeing most of the time. There aren't many tourist traps per se, just avoid some of the restaurants that look like they turn over customers quickly. Look for trattorie where you can sit and eat at your leisure, those are the ones that offer good local cuisine. If you like Renaissace art, you should visit the Uffizi Gallery - it is huge and there are lots of people but the collection of paintings and sculpture is impressive.
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