Aaron- hill work is a good way to improve leg strength and speed, but it is just part of the equation. It's not like you won't get faster if you don't do hills. It can help, but not doing it doesn't mean you won't run a good race. That being said, hills are a good workout.
The best way to integrate hills is to simply run a hilly route as part of your normal runs. If you want, maybe work harder on the uphills, then recover on the downhills. I like to do normal runs on rolling hill courses. Make sure they aren't so steep that they slow you to a crawl. Running a moderately hilly route on your long run can really help you, as well.
Another way to do hills is repeats, kind of like trackwork. Find a hill that takes you anywhere from 30 sec to 2 min to run up, and run up it hard a number of times (rest on downhill again).
Like you discovered, hills are hard on your calfs and achilles and can lead to injury. Start with small workouts and gradually build up- 1 or 2 moderately hilly runs per week is enough, or even 1 every other week. I know my only achilles injury came when I did 4 miles at 10% grade on a treadmill- too much, too soon.
I do not think you need to reduce mileage to do some decent hill training- just incorporate them into your normal runs.
Runners World has some good hill ideas-
http://www.runnersworld.com/subtopic/0,7123,s6-238-263-264-0,00.html