There are no direct trains between the Algarve and South Spain/Seville. However, there are good bus services.
See this article on my blog.
http://bit.ly/lagossevillebus2009
There is not really anywhere between Albufeira and Seville that matches Albufeira. There is Monte Gordo near Vila Real Stª. Antonio where there will be some night life but not like Albufeira. On the Spanish side there is Isla Cristina and El Rompido. However, I have only driven through them.
I would suggest, however, the following change to your itinerary!
Instead of going to Albufeira, why not head first to either Lagos or Praia da Rocha near Portimão. The transit time by bus is not much more than Lisbon - Albufeira and they both have great night scenes in Summer. You could then layover in Albufeira en route to Seville.
For more information on travelling from Lisbon to the Algarve, have a look at Cubsur's excellent site here:
http://algarvebus.info/
For bus and rail, go to my blog here:
http://barlaventostravelblog.blogspot.com
Scroll down on the right hand side and you will find a panel
entitled:
Algarve & Portugal - Travel Transport Links
In this panel you will find links for:
# Eva Bus Service - Eva Bus Service - Lisbon Sete Rios to Lagos
# RENEX Bus Service - Lisbon to Algarve (including Lagos) timetable
Hope this helps.
