We recently (last week and a half of February) spent time in Madrid with a start of a couple nights in Toledo. Had a great time overall, though a good chunk of the time for me was spent on Business, taking up four very full days.
In Toledo, we were mainly recovering from jet lag, but enjoyed wandering the streets and taking it easy. Stayed at Hostal Centro, it is as described in the Rick Steves book, basic, but clean and quiet, and a great location near Plaza Zocodover.
We did not try to hit every sight, but did do the cathedral (very impressive of the dozens I have visited in Europe), the Army museum in the Alcazar (more for history and military buffs, but very well done), and the Santa Cruz Museum. Not sure of the event, but the Santa Cruz museum was free the day we went (Friday, Feb. 19th), a nice bonus.
As for food, we most enjoyed Restaurant Ludena, eating there twice, mostly just for simple plates. We did find a good bar, near the Cathedral, "la malquerida de la trinidad", looked to have good meals, decent snacks, and very reasonable. we had a two glasses of wine and a doble beer, served with a snack/tapas, for less than 5 euro.
In Madrid, we stayed in central Madrid, at the Hotel Indigo, a very nice, modern, tastefully decorated place. This was a work approved hotel (part of the IHG chain), they were paying, but I would stay there again. Good location off Gran Via near Plaza Callao.
While most of my time was taken up with meetings, I did make a point to hit the Navy Museum, you probably need to be a military or nautical fan to enjoy it, I am, the museum is lots of Models of ships, cannon, small arms and other small items, but very little in the way of English descriptions. We also hit the three major art museums.
As for food, it was really the highlight of the trip. We did tapas at Casa Toni and La Oreja de Jaime, due to a vegetarian wife I passed on the Pigs Ears (too big a serving for just me) but at Casa Toni we did have the eggplant and the fried anchovies, and at La Oreja de Jaime, the razor clams (good, but better in Barcelona) the scallops...fantastic...and I had to try the lamb sweetbreads...simply unbelievable. We also enjoyed the Market San Miguel, meeting or stopping by nearly every day, trying a number of wines, port, vermouth, and sherry plus lots of small treats. We too late also found Market San Anton above Gran Via near the Chueca metro stop, a bit more modern than Miguel, but less crowded, bit cheaper, and more local. We did eat at Sobrino del Botin, some what touristy, but the building is a treat to be in and the suckling pig and the lamb is great, my wifes hake was very well done. The highlights for meals though was at a place called Casa 9, 30 euro two course meals in an intimate, elegant setting, went there twice and blown away both times. Also went to Casa Salvador nearby, again a very elegant experience and great food, with lots of bullfighting memorabilia on the walls. For churros, just go to San Gines, way better than Chocolaterias Valor, for a change of pace, they also do a thick churro about an inch or two in diameter.
Lots more small things, but that hits the highlights. Feel free to ask any questions.