train travel between Madrid & Lisbon

? There is no AVE overnight train. You surely mean the TrenHotel. It is nearly two decades since I took an overnight train and not this one. I doubt I will ever do so again. What experience have you on overnight trains?
To consider - it is not that romantic, do you think you will get enough sleep and be fresh enough for site seeing that day, what will you do in Lisbon at eight in the morning?

I have taken it twice (each way) about 2 years ago. It's standard for overnight trains, not any better or worse in my experience. So you can judge on that if you've taken other overnight trains. If you haven't taken overnight trains, be aware, as the previous poster notes, that you get little sleep and it's not all that comfy compared to a hotel bed. But they are safe and you can meet different people and it saves the cost of a night in a hotel. They also leave late, after 22:00 if I remember correctly. So I always struggle with what to do in the evening and usually wind up just sitting in the station for a couple hours. Having said all that, flying is a very viable option and not much more expensive, if at all.