Is it possible to stay outside Barcelona and train in?

It is possible, barcelona has a great subway system. Use google to locate a subway map to help locate a corresponding hotel.
I am curious as to why you would be driving such lengthy distances?

I know. I wanted to rail or fly to Rome, but my husband likes to drive and take his time. Have to give and take. Thanks, I'll look up the subway map.

You might want to have your husband look into how much it costs to rent a car in one country and drop it in another. The extra drop off fee can be very pricy. He might change his mind about that long drive.

How many days is your trip?

We are going to stay two days in Madrid and 6 days in a resort in estepona. He then wants to drive to Rome where we will take a tour of Rome, Florence, and Venice and then a train to Paris. We will be in Europe for about a month.

For driving in Spain be sure and obtain the required IDP from AAA.
Please tell us you are taking the AVE to Malaga where you will rent a car to enhance your day trips from Estepona.
Please tell us you are flying from Malaga to Barcelona.
Driving from Madrid to Estepona is a long boring time consuming event. Driving to Barcelona from Estepona is twice the agony.
Our first trip to Europe, ages ago, was for a month and I insisted upon driving as we traversed from Rome to Munich. My wife can still accurately describe the interior of the vehicle, over 30 years later. After the 7th day we recognized there was too much time being spent in the car, but were contractually committed to delivering the car to Munich. Additionally we spent needless time, and money, on finding parking spots and being concerned about the security of our possessions left in the car while stopping to visit places.
I strongly advise reconsidering driving these distances, especially since excellent train systems exist which allow you to travel in comfort, securely, with far less stress and maximize your ability to enjoy the journey. Train logistics are easier than perceived. Additionally, consider budget airlines to fly the greater distances and increase your time at your desired locations.

Thank you for your good advice. I read it to my husband and I think I have talked him into the train as you have advised

Glad he is coming around. Cars are really good in Europe for touring the countryside and smaller towns, either from a base location or as a trip around a country. But they are not as well geared for city to city travel and long distances compared to trains. And as noted, drop-off fees in different countries are very, very high.

Perhaps the compromise with him will be to rent a car for certain segments of the trip to get out and explore regions. Even a few-day rental a few times can be reasonably affordable (certainly less than the out-of-country drop-off fees).

For the Barcelona to Rome portion, flying would be cheapest and most efficient. But if you have the time, you can take short train segments stopping at places along the way in Southern France, Cote D'Azur and in Italy. And the ride along the Mediterranean Coast is stunning.

We males are a stubborn lot, but given enough opportunity we will eventual make the right decision.

Go to Tripadvisor and search for how to buy tickets on RENFE (Spain's train system).
http://www.tripadvisor.com/Travel-g187514-c80518/Madrid:Spain:Buying.Renfe.Tickets.Online.html
also try,
http://www.seat61.com/Spain-trains.htm#.UwzynZFICkQ
This is a complicated process that only the Spanish could create, but doing so on-line saves you time and money. NOTE: you must carefully select the date and specific time for the train you desire as the ticket is only good for that date and time. Be sure and take the AVE train (high speed) and purchase second class tickets (coach) and then be delighted with the experience. In Madrid the station is conveniently near the old town section. Arrive 45 minutes prior to boarding.

I use Autoeurope for car rentals and the Malaga station is an ez place to pick up the car. Use Google earth to define the best route to your resort (RCI?). Do obtain the IDP at your AAA for $20.
Ronda is an easy day trip, just be careful traveling on the two lane mountain highway (ignore the local drivers crazy habits and enjoy the views).
Seville is worth an overnight visit, but I would stay in a hotel outside the old town zone which offers parking. The old town zone is a nightmare (been there, still trying to get over that).
Granada is a tad over three hours via great highways. If you focus solely upon a visit to Alhambra this can be done in a day. You must buy advance tickets on line. Parking at the top of the hill above Alhambra and is very easy to access. Again, use Google maps to plot your course.
Do obtain a GPS with the car.
Do not pay for toll roads, they do not save time and are equal to the non-tolls in quality.

Having rented a car in Rome I would not do so again due to the heavy traffic congestion and confusing roads which makes taking day trips a hassle.

Thank you both for very good advice. We were in Europe several years ago for three months and had no trouble renting a car and driving all over france, Germany, Switzerland, and Austria and it didn't intimidate me as this trip planning has. You both have helped me a lot.

We rented an apartment in the town of El Masnou; we were a family of 8 and it was much cheaper. We were right across the street from the beach and the train station. Everyday we took the train into Barcelona. I don't remember how much it cost but I think it was just two or three euros for the round trip. Within twenty to thirty minutes we were in the heart of Barcelona. Trains were frequent. We used public transportation so can't help with rental car info.