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what to do on Christmas day in Madrid? or where to eat?

We will arrive at 8 am. We will take it easy this day but still want to wander around and get some nice food. My plan is to go to Mercado de San Miguel to eat, Chocolatería San Ginés, the Christmas market at Plaza Mayor. What else can I do for this day? The Royal Palace will be closed on Xmas day. We plan to take a bus or train to Toledo the next day. Where is the best place to stay? By the train station, or by Plaza Mayor? Thank you

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