If you don't apply for a Spanish driving licence and you get caught, then the fine is €500's.
Don't listen to all this guff about medical checks and tests, etc, it's rubbish unless you are over 70, or you have had your licence taken away for health reasons. I know, I've just got my Spanish licence and it's no thanks to all the rubbish written in "so-called" ex-pat friendly journals and ex-pat advice shops that charge you but don't want you to know how to do it.
You go to Trafico and ask for the documents required for the licence. Even of they don't speak English they will understand if you show them your UK licence and just say "documentos españoles para la licencia de conducir" or write it down and give it to them. The forms are easy enough to fill in, they are simply your NIE number, a copy of your signature, copy of passport and residencia. Any problems use :
http://translate.google.com/#en/es/
You need a driving licence regulatory photo and you pay €27.10's on the day you submit the forms to the cashier. You will then go to another booth to give the completed forms and the paid receipt. You have to go in person and produce your passport, which is why there is no point paying someone to do all this as they are not allowed to produce anything without you.
You leave the forms with them and they give you a receipt to say you have done this. Sometime later Trafico will write to you and tell you to go back to their office and present your UK plastic and paper licence. You hand these in and they give you a cardboard temporary licence. The real replacements are then sent to your house by post.
This incidentally was done in La Linea, but there will be little difference in the forms or the procedures elsewhere. The price may vary though. Good Luck and don't get fined.