Melroy,
I think your question is too broad. I would suggest you read Rick's Spain and Portugal books, then come back with questions about specific hotels, neighborhoods or activities.
When asking about hotels, it would be wise to include price range (or list of required amenities) instead of 'reasonably priced.'
FWIW, we stayed at the Hotel Intur Palacio San Martín in Madrid last summer and loved it. We paid about 160 euros for a double during high season. However, without a budget or list of amenities, I cannot tell you if it is 'reasonably priced' for you.
As for activities, you are talking about visiting two major cities. The list of potential activities is nearly endless: restaurants, cafes, bars, tapas joints, museums, historical sites, churches, bull fights, soccer games... read Rick's books and narrow down potential activities and maybe we can help you with some specific questions.
Dave