Madrid VS Granada

For those into history, the National Archaeological Museum in Madrid has an outstanding collection. It’s near the Prado Museum. Madrid also has the completely intact Egyptian “Temple of Debod” in the Parque De La Montana near the Royal Palace. As with the Abu Simbel temples, the Debod temple was relocated from Egypt to save it during the Aswan Dam construction and then reconstructed block by block in Madrid. There also are some Roman ruins in Madrid.

The main site in Granada is the Alhambra, which is arguably the most significant monument in the country from the Moorish period before 1490.

Because Madrid is the hub of high-speed train travel in Spain—if you’re traveling by train—you will pass through Madrid to get from San Sebastián to Seville, and also to get from either Seville or Granada back to Barcelona. So, you could simply overnight in Madrid for a night or two as you’ll be passing through the city in any case.

From Donostia/ San Sebastián, we rented a car to visit the Royal Palace of Olite and it was a highlight of the trip. The massive castle is really magnificent. It was the power center of the Kingdom of Navarre for centuries. We stayed in the castle overnight as it is a Spanish Parador today, offering lodging and dining.
Olite is about a 90-minute drive from Donostia/San Sebastián. Olite also is in wine country and close to the nearby Rioja wine region.

Another incredible monument is the Palace of Aljaferia in Zaragoza. Zaragoza is a stop on the high-speed train routes from both Seville to Barcelona via Madrid, and also Granada to Barcelona via Madrid.

What kind of time are you allowing for this trip? The towns listed are kind of spread out, so days available may decide more than opinions.

The Alhambra is the absolute highlight of Spain, closely followed by the Mesquita in Cordoba. Both are so beautiful they left me in awe.

Madrid makes more sense in terms of your itinerary so I would go with Madrid.

The Madrid restaurant scene is world class, tons of great wine bars, tons of museums; I think it would be a shame to skip Madrid even if you're not "city people."

All of Spain is historic, with very good food and great wine. The culture is so rich that you will not be able to take it all in on one visit, especially if it is your first visit, and you do not speak Spanish, and you have not tried to do a lot of advance learning.

Every place you have listed is a city except for Rueda.

The itinerary seems to jump around a bit--I cannot really determine why you are choosing the different places. I agree, your available travel time will have an impact--are you taking public transportation, renting a car, or flying?

You do not seem to have done enough research to know WHY you are going to a certain place, or what exactly you want to see. If you are big outdoor enthusiasts (whatever that means), you should do more planning to see what is possible in Spain.
Resource:
https://www.spain.info/en/top/outdoor-plans-spain/

Every time I visit a new country, I always try to get an overview of the capital city, since that is where most decisions are made.

I would never choose between Madrid and Granada--instead I, personally, would choose Madrid over Barcelona, and spend more time in the South of Spain, because the multi-century Moorish impact is unique and fascinating.

In order to get the most enjoyment of a trip, one should always try to decide what is personally of most importance. No one can give recommendations if they do not know your exact interests, budget, health, abilities, available time, etc., etc.

For example, I consider myself a big city person (I go shopping in NYC for the day), but on my most recent visit to Iceland my priority was to go horseback riding. We have been going to Switzerland almost every year in the Winter recently--just so husband can ski, NOT to sightsee. Whenever I go to Spain, I always have to see flamenco, and dance it as well!

Best wishes with all your planning.

We have done both.
Madrid, itself is not so awesome, except visiting the Royal Palace and the Prado Museum, however, if you skip Madrid, you would miss the real gem of Spain (TOLEDO). Do not miss Toledo.
Also, north of Madrid is Segovia, another great visit with a 1800 year old intact Roman aqueduct.

Seville is must see as well.
If you miss The Alhambra on this trip, do it on another.

I loved Madrid-the Prado and the Royal Palace were wonderful. But you won't see the Alhambra anywhere else in Europe so I would choose Granada. Most people on this forum will strongly disagree with me on this, but I was not a fan of Sevilla-it is the place I would drop from your trip.