The flat tire scam, revisited....

You post has me confused... Why would you drive in those cities you mention, to start with? They're really not car friendly.
Nobody here will claim that Spain is safer than Switzerland or Germany, and yes, there is a big pickpocket issue in Barcelona, but I don't think there's enough there to warrant avoiding the entire country altogether.

Good question.....

1) whatever happen in a city is a reflection of the city,, it’s like, why would anybody drive in some questionable area in New York City, risking car jacking and drive by shooting... if I don’t drive there, does it mean it’s a family friendly place to visit

2) contrary to many of you, I am not a fan of Europe by train with kids .... thought of looking after and loading baggages trouble me .... thus, my trip is a 3 weeks adventure like this:

Day 1 Barcelona (don’t need a car)
Day 2 Barcelona (don’t need a car neither)
Day 3 Fly and staying in Granada (no rental car)
Day 4 Granada
Day 5 (beginning of road trip using a rental car) Málaga
Day 6 Malaga
Day 7 Malaga
Day 8 Seville
Day 9 Seville
Day 10 Seville
Day 11 Córdoba
Day 12 Toledo
Day 13 - 17 Madrid (can’t dump the rental car here as it would be great for day trips)
Day 18-19 Valencia (with tickets for La Tomatina)
Day 19-21 Barcelona (was originally leaving from Madrid until Norwegian canceled the Madrid-NYC Route, so I have to fly out from Barcelona ... the reasoning is if Norwegian go under or cancelled the Barcelona-NYC route, I don’t get stuck with a partial airline reservation). The road trip ends here and fly back to NYC.

The ending Barcelona part is a placeholder to visit sights that we may miss ... if the first 2 days are enough, we may keep the rental car visit Stiges and Solou (Ferrari Land) which my kids love.. if not, we may just return the rental car at the Santa Just train station (which is well known for the slash tire scam... people claim they got it right after leaving the parking lot, making me very nervous about returning the car there)

Hope this makes sense about the rental car.

Quite frankly if your just visiting the above big cities with a car, it will be more hassle than it's worth, unless your hotel is on the outskirts of the cities. Toledo and Granada especially are not car-friendly cities. Trains can also take a lot of the worry out of your trip-especially as you seem overly frightened about driving and car crime.

We feel European countries like Austria and Germany are more civilized for family visits.

Then why not take your family to Austria or Germany, feeling the way you do about Spain?

If you think it will be an issue, take a bus or train. If you’re only going to major cities, take a bus or train. If you think the scam is Barcelona-centric, don’t visit there. Having lived in Spain and visiting it every couple years, almost always with a rental car, I’ve never had an issue. Just to give you an idea, parking in the major cities will cost you about €20 a night average; some maybe €15 but others €25. Hopefully you can find lodging where parking is included. Also, rent your vehicle from one of the major companies as they are more likely to quickly respond to an issue. All rental contracts have a number to call in case you need roadside assistance.

Apparently the flat tire scam is still alive and well in Barcelona

What do you mean by "apparently"? Please post data source if you have such information. The sample size on a forum like this is way too small to use isolated reports as some kind of proxy for actual incidence rates.

It happens, though probably not as often as the more feverish websites claim. But you've apparently been to Spain before, did you hire a car? What were the consequences?

It is a bad idea to keep a car for day trips out of Madrid. Traffic isn't great in Madrid (though better than, say, in London and Paris), parking is expensive, and driving is extremely unpleasant in the likes of Toledo and Segovia. You'd have to park out of the historical centers.

I'd drop the car in Sevilla, take the train to Córdoba, then again to Toledo, and to Valencia, and to Barcelona.
Or, if you want fewer trains, see if you can drop the car in Toledo.

Yes, train with young kids and the luggage that comes with travelling with kids is a bit less 'smooth' than when it's just adults. But, for instance, the Madrid-Valencia A3 is 3.5 hours of sheer boredom compared to 100 minutes on a train. Valencia-Barcelona on the AP7 is perhaps even less interesting, and with tolls to boot.
Sevilla-Córdoba-Toledo is more interesting hence my suggestion that you look into keeping the car until Toledo. With a car you could stop in Consuegra.