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Need suggestions for lodging & things to see in Madrid & Barcelona

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My 20 year-old daughter and I will be spending about 8 days total in Madrid & Barcelona. My daughter will just have finished a semester at the University of Salamanca, and I'll be joining her to see the sights of these 2 cities. I need to arrive and depart from Madrid, and somehow get to Barcelona during my trip.
Decisions I'm facing:
1. How to split up our 8 days between the two cities. (I figure I might want to spend my first day in Madrid, getting adjusted to the time difference and taking an evening bus tour, as suggested in a forum post that I saw). We want to take day trips to Toledo and Valencia, and perhaps Segovia.

2. I need to arrange lodging in a safe area, but I don't have the budget for a high-end hotel. Suggestions in both cities for this, please? We need to be within reasonable walking distance from public transportation. And what are some of the best resources for arranging lodging in advance?

3. Which city would be best to take in a traditional Spanish show? Any suggestions?

4. My daughter wants to see the "Valley of the Dead", as that is where Franco is buried. Is that worth seeing?

Thank you for any suggestions you can give me.

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