Spain -cannot decide on schedule!

I would recommend that you go to Granada. Everyone should see the Alhambra! and it's a smallish town compared to Madrid. If you do 2 days in Tangiers that doesn't leave you time for too much of Spain. and, to me, Spain is worth of all of your time. just my opinion. however, I have never been to Tangiers. Sevilla is also a nice town, however, it will likely be very crowded for Feria....

Toby's right....with only 8 days on the ground, travelling around like that will mean you'll spend too much of your time on the move. Tangiers is an interesting side trip, but not worth a quarter of your valuable vacation time....save it for another tripm, because you will be back!
I love Sevilla...but I was there once during the Feria and, while it was an interesting spectacle, I wouldn't go back anytime soon. The entire city is jammed, and hotel rates double and triple....if you can find anything left....unless Liz has a spare bed ;) While you'll see lots of colourful traditional costumes, the main purpose seems to be staying up very late eating and drinking at one of the hundreds of casetas on the fair grounds, then trying to make it into work the next day. Semana Santa, while just as crowded, is a far more interesting spectacle. Leave Sevilla until your next visit, too.
Granada is definitely not a hill town....it's a big, bustling city. But, as Toby notes, it's home to the Alhambra, the most popular tourist spot in Spain...a definite must to get an idea as to the Moorish influence on Spanish life.
A better bet for a hill town, on your limited schedule, would be Ronda....home of the original bullfight, or so they claim. Wonderful natural surroundings.
If I may be so bold, I would suggest two full days (3 nights) in Madrid, then an early morning high-speed AVE train to Malaga (about 2.5 to 3 hours) then a bus from Malaga to Ronda (about 2:45...the bus station is right next to the train station....buses leave, on the current schedule, at 10am, and 1 and 8 pm). Spend two nights in Ronda, then take the train to Granada (departures roughly at 9 am, 215 and 535 pm...takes 2.5 hrs.) Spend 2 nights there, then head back to Madrid by train or bus (about the same travel time...5 hours, but buses more frequent, and far cheaper.) That should give you one last night in Madrid before leaving.
Some websites of interest to follow....

For rail travel, you can book tickets up to 62.5 days in advance at the Spanish national rail website, RENFE Up to 60% off is available Madrid-Malaga, as low as 31 Euro...you print your tickets out at home. The website is mostly in Spanish, but pretty easy to follow.
For bus service Granada-Madrid, check here. For bus schedules Malaga-Ronda, here's the place to find them.
And finally, remember that entrance to the Alhambra is strictly limited...when they sell out for that day, that's it. Book your Alhambra tickets as soon as you can here.

I agree with others - you don't have enough time to really do even this part of Spain justice, and a side-trip to Tangiers doesn't make sense - it just burns too much of your limited time.

By all means, you should see the Alhambra, so include Granada.

While Ronda is easier/quicker to get to, IMHO Acros is WAY better.

I should've stated that the Tangier's portion is non-negotiable. Our trip is based mostly around getting there and seeing some of Spain along the way, we have friends in Tangiers that we are going to see.

I definately cannot do 3 nights in Madrid either, but I might consider cutting out Sevilla.

Thanks for all the help.