Madrid or Toledo for first night I’m Spain

I would not want to attempt a museum on my arrival day because I am a zombie after a sleepless overnight flight, so I prefer the go-straight-to-Toledo approach. I'm about 1-for-3 on even being able to walk around outside for awhile on my arrival day.

I have no experience visiting the Reina Sofia during its free evening hours, but during my daytime visit the only clot of people was in front of Guernica, and a few minutes later those folks had mostly wandered off. I suspect crowding would not be too big an issue for you.

Rail fares to Toledo do not vary, so as long as seats are available you will pay the same price whether you buy your tickets now or upon arrival. I think it's unlikely there will be an unusually heavy demand for tickets on a Monday evening, assuming there isn't something special going on in Toledo.

There are also buses to Toledo. They take a bit longer than trains, but that gives you a second option. Most of the buses are run by ALSA and depart from the Plaza Eliptica bus station, which is accessible my Metro. You can check the schedule for your travel date on the ALSA website.

I imagine many taxi drivers would be pleased to have the plum assignment of driving you from the airport to Toledo if you have a serious flight delay. I have no idea how much that would cost, however.

Both options have their challenges. Have you been to Madrid before to have some expreience with the logistics of getting from airport to Atocha station then buy ticket and go through security check to train, arrive in Toledo in the dark and then to hotel?
I would be more inclined to stay in Madrid that night, myself. I was at Reina Sophia on free Sunday in November and it wasn't as crowded as I would have expected. Find lodging near Atocha or Museum district and you can drop luggage, visit museum, get a quick dinner, early night and easy access to Toledo next morning. I had an apartment in the area and I recall a local cafe with evening menu del dia that served well before 8 or 9 p.m. you are also close to RS Tapas row.

Most of the riders on afternoon/evening trains to Toledo are commuters going home from Madrid. I would not expect the later trains to be sold out.

Why not spend all three nights in Toledo and day-trip to Madrid on Wednesday?

I'm going to be the lone person to say spend two nights in Madrid and one in Toledo. While Toledo is a cute town and understandably touristy, Madrid has much more to do and is easy to get to other places.
Is there a reason you don't want to see Madrid? It isn't just the Guernica, there are other museums, parks, shopping, markets and if nothing else you can catch a train to Segovia. Toledo was nice but I'm not sure I'd spend two nights and not see much of Madrid. JMO.

I was just in Madrid/Toledo/Segovia/Andalusia in November. Madrid was lovely, lively and fun, but not at all as historic and interesting as the other places I visited. If you are interested in the art museums I would definitely go to Madrid. Otherwise I'd concentrate travel time in areas outside Madrid. I stayed two nights in Madrid, but wasn't there during the day. After walking to the royal palace to see it in the evening and doing some other wandering around, I decided on my next trip, I would spend a day in Madrid, but only a day. If you do want to spend a bit of time in Madrid, I like the option of doing a day trip to Madrid from Toledo.

If I understand correctly, you have 3 nights, one being the day you arrive which means you really only have one full day in each place. Because you’ll be arriving so late, if your flight is late, you may miss the Reina Sofia altogether since it’s closed Tuesdays. I suggest Option 1; heading straight to Toledo. As you will be tired, you can just walk around Toledo without the tourists, have a nice dinner and get a good night’s sleep. The following day you will be ready to enjoy the city, well rested. In September 2014, I went to the Reina Sofia during the free hours. People began lining up about 30 minutes before it opened. While there was a line to get in, it moved very quickly. The museum wasn’t any more crowded than it would be during its regular hours. Photographs were allowed in all but 3 galleries; one being the gallery containing Guernica. A couple hours, to me, is a sufficient amount of time to see the museum.

I will also add that hotels are generally cheaper in Toledo than Madrid if that has any impact

Than you so much to everyone for the replies! It really helped me figure this out. I realized that because there are so many unknowns (flight delays, jet lag, etc) it comes down to worst case scenarios, which for us is that we miss the last train to Toledo or even if we're on time, we're exhausted and jet lagged and getting from the airport to our Toledo hotel is more complicated than we expected - Thank you Maria for putting that in perspective. Thus we will stay in Madrid the first night and take our time getting to Toledo the next day. If the museum doesn't work out that night we'll try to to see it before flying out of Madrid on Wednesday. Or we miss it entirely which wouldn't devastate us.

Heather, I appreciate the Madrid plug :-) I'm not big on museums, particularly if they involve lines and crowds, but the Guernica is of personal interest to my husband so I'm making an exception for the Reina Sophia. The idea of walking around the old city of Toledo and soaking up it's history is far more intriguing to me and, since the rest of our 25 night trip will be dominated by large cities, I think it will be nice to spend a couple nights in a slower paced destination. Your comment did, however, make me take another look at what else I might want to see in Madrid, as we can make time either the day we leave or come back from Toledo.

Thanks again for everyone's advice!