Feedback on my whirlwind Madrid itinerary

Definitely don't forgo the Mercado or Retiro Park. My friend and I spent 3 days in Madrid last fall and those were two of our favorite things we did during our time there. Truthfully, we may have spent more time in Retiro Park than we did the Prado. Although we enjoyed the Prado, we probably would have appreciated it more if art were one of our main passions. We also attempted to see it right after flying into Madrid, so we were very jet-lagged which may have impacted our enjoyment of the museum.

I don't know if you'd have time on this trip, but if you return to Madrid, I would definitely recommend taking a tour of the Royal Palace. It's the largest palace in western Europe and it's absolutely stunning. Unfortunately, the lines to get in are insanely long (it took us around 90min). My friend and I didn't buy our tickets in advance, and oddly enough, our line moved faster than the one for pre-purchased tickets.

Hope you enjoy your trip!

We were in Madrid earlier this year and really enjoyed the city for four days. You would do better to spend as much time as you can in Madrid staying in one hotel. You can easily make Toledo a day trip as the train ride is just not that long or far.
And the Royal Palace is a must see there.

We have found that it's better to see any city properly than just hit and miss because we didn't allow enough time to see the town. Madrid (and other great European cities) is a four day minimum place.

Given then amount of time you have I think this is an excellent plan. I would agree with staying overnight in Toledo as opposed to a day trip. The evening there, when all the day trippers have left, is magical. You’ll remember that for a long time. While the Royal Alcazar is beautiful, you have to pick and choose, and I think you’ve done well. It will be there when you return. The Prado is huge, but has some must see works. Given the limited time you have there a worthwhile investment would be a guided tour.

Thanks for your feedback. I know in order to really see Madrid I need more time, but the focus of this trip is Toledo and Barcelona, so a small taste of Madrid is all I get this time around.
I will make sure we get to Retiro park, and I'm looking into a guided tour of the Prado so we can really get the most out of our visit.
Thanks for the tips!

A guided tour might help you enjoy the Prado more, or it might put you in a large group of people being herded around. A private guide would cost more of course. For me, the "self tour" in the RS guidebook was more than adequate. I spent about four hours there, including pursuing some of my own interests. It's a well-designed museum with good elevators and bathroom placement (unlike some others....) If you know you're going there, I'd recommend getting tickets online to save time. They commit you to a date but not an entry time.

A couple minutes walk from the Puerta Del Sol is Chocolateria San Gines. Great for churros and chocolate and has been in the same location for over a hundred years. Since you plan on visiting the Reina Sofia on a Sunday, it is free to enter on Sundays from 1-7pm. If you decide to change you visit day, it has free hours from 7-9pm the rest of the week except Tuesdays. Mercado San Fernando is open 11am-5pm on Sundays. FYI, the Prado has free entrance Mon-Sat 6-8pm and Sunday’s from 5-7pm. Since the Reina Sofia and Prado are pretty close to each other, you might be able to fit in both, on Sunday if you got to the Reina Sofia early enough. To me, you can see the most important rooms in 2 hours. Then head to the Prado. 2 hours isn’t a lot in it, but you’d be able get a good taste for it and would simplify your Monday morning, by making it not as rushed.
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I think I would go straight to Toledo on Friday. Consider storing most of your luggage at Atocha and taking an overnight bag. You can buy the Toledo tickets at Barajas. Just tell the agent that you need an extra 15 minutes or so for luggage storage. Then come back to Madrid on Saturday night or first thing Sunday morning. That way you can gauge how you feel (jetlag) and you won't have a long slog to get from the center of Madrid to Atocha to luggage to the train and then from the train to your hotel in Toledo.