I have a reservation for two nights. My husband is questioning staying outside of the city as we understand a main reason to stay overnight is to enjoy Toledo at night when the tourist have left. We do have a car so arrival would be easy I presume, but we'll probably turn it in here, take taxi/transport in Toledo and train back to Madrid (to fly home.)
Thoughts on staying in city or at the Parador?
As long as you're willing to take a taxi between your parador and central Toledo, you'll be fine, and you should be rewarded with a great nighttime view when you get back.
We loved staying within the walls in the city center.
Keep in mind that trains from Toledo to Madrid depart later on the weekends (earliest train departs @ 9:25AM), so if you have an early flight departure, you need to plan accordingly.
Enjoy your trip!
Edit to add:
BTW, you don't need a car in Toledo :)
In Toledo, we stay at hotel Maria Cristina. It's a short walk (5 mins.) to the main entrance/gate, then a short walk uphill to the center. It also has a nice parking garage that is easy to maneuver in. There is an escalator nearby if you don't want to walk up the hill. The streets inside the city center are very narrow in places.