Valencia

What's the opportunity cost? I.e., how much time do you have to see your other destinations? Is Cordoba already covered?

I still haven't made it to Valencia after at least 4 months in Spain, so I'm in no position to speak up for it, and I've studiously avoided the Costa del Sol so can't make that comparison.

I liked Cuenca a lot. It's on the AVE line between Madrid and Valencia (about 1 hour from Madrid by train). It can be reached by car in not much more than 2 hours. It's not on the direct route between the two cities, however.

According to ViaMichelin, inserting Valencia into your itinerary will increase the driving time between Madrid and Granada from about 4-1/2 hours to 9-1/2 hours. Both of those times are probably somewhat optimistic.

You would if you really had a desire to see Valencia. There are dozens of cities I’d choose to see in Spain before Valencia, but that’s only my opinion. I’ve been there twice. If you're going to Granada, then Valencia is way out of the way. You might be better able to use your time visiting some of the towns and cities between Toledo and Granada. There’s a castle and windmills at Consuegra and more famous windmills (Don Quixote) at Campo de Criptana. Both are within an hour of Toledo.

As the others have said, it's very hard to answer without knowing more about your overall schedule. I love Valencia, it is one of my favorite Spanish cities. But having said that, it lacks some of the tourist punch other cities have, like Granada, Sevilla, and Cordoba. If you have a couple of days to do the extra drive and spend a night or two, by all means go. If you must cut something else to get there, weight what else you might be missing.

Valencia is not really ‘on the way’.

If you have 2 days, and wish to head directly.
1. Drive via the windmills of Consuegra to Baeza/Ubeda.
2. Drive via Jaen to Granada.