As for driving a UK registered car in Spain on your UK Insurance, check with your Insurance company that you are covered to do so, as many of the 'cheaper' policies offered by so called 'competitive' Insurance companies leave out valuable options such as driving in the EU.
If you have such Insurance cover, then as long as the UK registered car is FULLY legal in the country of registration, and that country is part of the EU, then you can drive that car on Spanish roads for as long as it is fully legal. However once you become a Spanish residence, then the car MUST be re-registered onto Spanish Plates, and in order to do this you must have an ITV (Spanish version of MOT) conducted on your car BEFORE you re-register the car.
In order to re-register the car, you must be on the local Padron (Council register) and you must have an ITV certificate for the car. You can do this all yourself by taking the car to the nearest ITV centre, mine is in Estepona, and then contact a local 'Gestor' (who is kind of like a lawyer and an accountant rolled into one) and they will re-register the car for you.
Doing it this way will save you a lot of money.
As for how much you will have to pay, well read all the posts in the thread I gave you the link in my last post, this will give you some very good pointers.
Also, it helps if you have owned the car for six months or more BEFORE you register on the Padron, as you can save paying all or most of the 'Matriculation' tax as mentioned in the other thread.
Phew! Hope all this helps and I will let you and everyone else know what happens when I re-register my car in a few weeks time.