Madrid and Toledo

My preference would be plan B, (but that's because I've already visited the main highlights in Madrid) and I prefer the ambience of Toledo, especially in the evenings once the crowds depart.

What is your plan after visiting Toledo, if you choose plan B?

Will you need to get to the Barajas-Madrid airport from Toledo?

If so, you may want to reverse your destinations & end your trip in Madrid.

We spent two nights in Toledo and loved it. Our lodging was a lovely apartment at Casa de Los Mozárabes:

https://www.casadelosmozarabes.com/#

Thanks Lola and Priscilla. If we went with Plan B then on Day 5 we would take an early am train back to Madrid and then fly to Lisbon. Reversing the route is interesting but we'd still need to make the journey to/from Toledo. Plan B is sounding better all the time. Any other thoughts are welcomed.

I'd go with Plan B. I like Madrid as a city, but find it a little dull as a tourist. The museums are amazing but after that, meh... That's just my personal opinion - others love it.

Toledo is jam packed during the day, but after the hordes have left, you can wander narrow winding streets to your heart's content. Then spend time trying to figure out where you are and how to get back. And you have more time to see the smaller museums and sites that are pretty amazing. The restaurant scene isn't as good as other places, including Madrid, but for 1-2 nights you can find some good food.

Even just one night there would be better than a daytrip.

I am going to Madrid in late Fall and will have to do Toledo as a day excursion. Is it better to go by bus
or train

Either will work, but a train will be a bit faster. Rick's "Spain" guide book discusses the transportation options for popular side-trips like this.