My wife, 2 kids (16 and 11) and I just returned from a week in Spain. A few items to share about our trip:
We landed in Madrid, stayed one night there and then took the train to Granada for 2 nights, followed by 1 night in Toledo and finishing with 3 nights back in Madrid. The weather was great all week - upper 60s and lower 70s every day with plenty of sunshine made it easy to enjoy lots of outdoor activities.
My wife and I have been to Spain before, but this was the first trip for our kids. We would have loved to do Barcelona and some other places, but we had a limited time before having to return.
Granada is amazing. Just getting lost in the Albaicin district with its hills, tangled and characteristic lanes, and strong Muslim influence was so much fun (day and night). These streets spill out into lovely plazas and squares in all sections of town, and the slower pace is a nice counter-balance to bustling Madrid. We stayed at a great little AirBnb not far from the lovely Cathedral. The Alhambra gets all the headlines here understandably, but Granada has so much more to offer (even in a short visit). Easy 3.5 hour direct train from Madrid.
We stayed just 1 night in Toledo, but it was lovely. Our hotel (Hotel Carlos V) had a very central location and a rooftop bar with what have to be the greatest views in Toledo to enjoy at sunset. Taxi at train station took us on a short (20 minute) loop around the prime viewpoints across the river for the iconic spots for pictures for 15 Euros - good investment. As Rick says in his travel talks, just spend the night to get some less crowded time in Toledo or other touristy towns. Toledo was nearly a ghost town on a Tuesday night, and my wife and I left the kids in the hotel room that night as we walked the beautiful streets until late (I kept telling my wife the place looks like a movie set when there are not so many people around). We ducked in a little bar in the Jewish quarter for tapas and cervezas - I could be wrong, but I had the strong sense were were the only tourists in the area at that point. The Cathedral in Toledo is absolutely stunning - our kids were both blown away too at the beauty of the architecture and the art.
We stayed in a lovely AirBnb near Opera metro station in central Madrid, just a few minutes from the Royal Palace. On our first night there, we stumbled into Madrid's lively take on St. Patrick's Day celebrations (LOTS of people, festive parades with floats from neighborhood churches all finishing at the plaza in front of the Royal Palace).
In Madrid, we especially loved: time in El Retiro Park (renting bikes to ride there, renting a row boat on the lake there); Naval Museum (it's free with suggested 3 Euro donation and very well done - kept everyone's attention for a couple hours); dinner at Mercado de San Miguel (on one of the weeknights when it was less busy than during the St. Patrick's Day crush - it is a zoo any time but kind of fun to go around having our kids try different stuff); Royal Palace; Hop-on-hop-off tour of Madrid; taking the very safe/clean/efficient Metro system to get around.
I think it is hard to beat Madrid's dining scene, especially when the weather is great and every place seems to spill out into the streets for dinner at 10 pm as the locals do.
The people in Spain were very friendly and willing to help us with our poor Spanish. There was no significant language barrier, and our kids enjoyed trying their language skills out with locals too.
I thought the trains were very efficient and the busy Atocha station in Madrid is well-organized. We found people willing to help us.
Spain is still relatively cheap, compared to much of the rest of Europe that we've seen. In Spain (even in big city Madrid), a beer or house wine is 3 euros or less and sometimes comes with a tapa (free snack - though not everywhere does this).
One of our favorite trips for sure!