Just a 5 minute walk from Puerta del Sol is what may be the best deal in Spain. Rick recommends Restaurante Puerto Rico and I wholeheartedly agree. This place is just far enough away from the tourists that is is a favourite of locals. We were the only tourists there and everyone else seemed to be on a first name basis with the staff.
A bottle of house wine €3.00 and it was pretty good. Roasted half chicken dinner €4.00, excellent. We came back a second night. Thank you Rick for another great suggestion.