Here's my revamped itinerary:
Day 1 - Travel to Budapest (arrive afternoon)
Day 2 - Budapest
Day 3 - Budapest to Vienna in the afternoon (Train 2.5hr)
Day 4 - Vienna
Day 5 - Vienna
Day 6 - Vienna to Salzburg (Train 2.5hr) - collect rental car, drive to Grossglockner then Hallstat
Day 7 - Hallstat to Innsbruck - return car at Innsbruck
Day 8 - Innsbruck to Chur (Train 3hr)
** Chur being a logical stop to Zermatt rather than a super long day, or should I bite the bullet and head straight to Zermatt (8hr train ride) **
Day 9 - Chur to Zermatt (Glacier express or regular train - 5hr)
Day 10 - Zermatt - Interlaken/Grindelwald (Train 3hr)
Day 11 - Interlaken/Grindelwald
Day 12 - Interlaken - Zurich (Train 2hr) - flight departs at night
Question: Should I cut down a day in Vienna to spend more time in Salzburg instead ?
If you're like me and don't really like cities that much, then you can consider cutting down a day in Vienna. Salzburg and Innsbruck are both large cities in Austria as well, although smaller than Vienna.
But considering you're planning so many days in Vienna, I'm assuming you have things in mind already? Honestly I spent at least 2-3 days in Vienna, Salzburg, and Innsbruck and each of them can take up to 3 days each for sure. But with your itinerary it's really more of what you want to sacrifice. Hallstat itself can also be a 2hours thing or a half day trip if you also head up to the salt mines.
Might be easier if you share with you really want to do, and what you're on the fence for - then we can better advise on things you're uncertain about.