Andalucia Itinerary HELP

I like your Option #1. That is more or less what I ended up doing, and it worked out great (well, we were going in the opposite direction, and we didn't fly to Lisbon, but given your list of places and time allocated, I think your plan looks quite good).

While the shorter, nonstop flight to Lisbon would obviously be preferable, IIRC I found it challenging to get between Granada and Sevilla via rail, so we came up with a routing similar to yours. A extra couple hours for your flight in Option #1 is a reasonable trade-off.

Yeman,

I like option 2, mainly because it avoids the need to backtrack to Sevilla.

You can easily travel from Córdoba to Granada via train or bus. My mom and I took the
ALSA Bus on this route because there were more time options, and we also didn’t want to transfer from train to bus in Antequera; due to ongoing railroad construction around Granada.

We didn’t rent a car while visiting Andalucia so can’t help you with that.

Make sure you book your Alhambra tickets 3 months in advance.

Enjoy your trip!

Edited to add...
I was writing so didn’t see what David had written until I added my reply.

If you decide not to rent a car, you can travel via ALSA bus from Granada to Sevilla.
The ALSA buses are comfortable and air- conditioned.

You can also travel via train from Granada to Ronda, and then by bus from Ronda to Sevilla.

Hopefully Chani will chime in as she’s driven in Andalucia while she visited some hill towns.

Yeman

I just had another thought.
Since you’ll be spending two nights in Toledo, you may consider taking one night from Madrid and adding it to Lisbon; then you can take a day trip to Sintra.

Have a wonderful trip!

I agree with Option 2. That way you don't have to bother with the car in Granada. We did the same thing during our trip in September. The trip will be train from Cordoba to Antequera (it was fast, about 45 minutes I recall), then passengers are walked to where the bus is waiting and the remainder of the trip is by bus (about 1-1/2 hours I recall). You just buy the one ticket from Cordoba to Granada and it includes both the train and the bus, no need to buy those separately. You can use the Renfe ticket website to purchase tickets, but I had an easier time with loco2.com - they are both still Renfe tickets, loco2 is just a third party seller that happens to have a nice website!

Then, we rented a car back at the Granada train station and drove through Ronda and Arcos on the way to Seville. We used Europcar and had a good experience. In Ronda, we parked the car at a pay lot at the Plaza Dusquesa for 18 euros per night I think. In Arcos, we only stopped through for a few hours, so just parked in an underground pay lot down the hill from the basilica. There was a lot right at the basilica too, but I'm not sure if it's one you can park in for a couple nights.

Your trip sounds wonderful, enjoy!

I would go with a 3rd option.

Start in Barcelona Oct. 1-6 (5N)
Train to Madrid Oct. 6-11 (5N)
Train to Toledo Oct. 11-13 (2N)
Train to Cordoba Oct. 13-15 (2N)
Train to Sevilla Oct. 15-19 (4N)
Train to Granada Oct. 19-22 (3N)
Rent a car in Granada
Drive to Ronda Oct. 22-24 (2N)
Drive to Arcos Oct. 24-26 (2N)
Drop off car at Sevilla Airport
Fly to Lisbon Oct. 26-30 (4N)

Thank you everyone for all your suggestions and ideas. Appreciate it!
We have decided to go with Option #3 from David in Australia. We thought going to Sevilla after Cordoba would be best, then on to Granada (3N), Ronda(2N) , then Arcos (2N) to slow down since we would have been traveling over 3 1/2 weeks. We'll day trip to Jerez and or Cadiz from Arcos. From Arcos we'll drop the car off at Sevilla airport then onto Lisbon (4N) , then back to California.
Are there any other towns we should not miss?

Thanks again, Yeman

That sounds like a phenomenal trip.

I'll be in Andalusia from Oct. 21-27! Going to Granada, Cordoba and Sevilla. Very excited to see this beautiful, interesting part of the world.

Yes, I always try to find a way where you’re not paying for a car you don’t need. In this case, you don’t needs car in either Granada or Sevilla. Plus, it’s always easier to leave a car at an airport rather than a city location.
I too am jealous of this wonderful trip. I’m sure you will enjoy a great time.