We had maybe a little more than 2 weeks for the trip that is represented by these pictures (all geo-tagged):

http://www.flickr.com/photos/mksfca/sets/72157622975757180/show/

But, your must-see, Barcelona, is in the north. Of course, you could hop a train in Madrid and go there for a couple of days for a look-see before continuing your trip. On leaving Madrid, I'd pick up a car and go to Toledo, Granada, Cordoba, Seville, Salamanca, and back to Madrid. A big trip but a lot of fun and a lot to see.

Let's begin with what are you interested in seeing and doing with your two weeks...

I didn't really understand that comment about wanting to stay in the south but the only must-see is Barcelona, either.

It isn't convenient as it is a big triangle and the country is large (Barcelona-Madrid-say Seville). But 2 weeks is a good amount of time to do all that. I might check out smaller airline flights between Seville and Barcelona if you really must fly in and out of Madrid. Iberia certainly flies to/from Madrid and both SVQ and BCN, of course.

For example, fly into Madrid, take the AVE to Seville. Do whatever down there for a while, then fly from SVQ to BCN (Vueling flies direct between the two for only around 40 euro, for example). Spend about 4-5 days in BCN and take the high speed train back to Madrid for a day or two before your departure flight.

Try to do an open jaw with your FF points.

Thank you, and sorry to sound travel stupid. I do know where Barcelona is. If we can fly there, I would start there for several days, then pick up a car and drive south, maybe end with a few days in Madrid. Will look into open jaw, and Vueling flights. Back to map gazing.

With 2 weeks, you might want to consider visiting at most 2 of the 3 regions you mention, Barcelona+, Andalucia, and Madrid+.

I've often found one-way airline tickets in Spain to be relatively cheap, sometimes even at short notice. You can use a combination of high-speed train, short flights and car rental to experience the diverse regions in Spain. It's one of my favourite places to visit (I've been to Salamanca, Madrid, Seville and the surrounding region, Granada, Barcelona, Girona and Cadaques). Of these, my favourites were Barcelona, Granada and Cadaques. I'm less thrilled with Madrid, but it might be because I mostly went there on business and sometimes was there in blazingly hot summer.

If I were travelling to Spain (with someone who had never been there, so I wanted to feature what I loved best), I'd probably do the following:

1) Fly into Madrid and get over my jet lag there by visiting its beautiful museums (Picasso's Guernica, in and of itsself, is worth stopping in Madrid), napping, bar-hopping/tapas-tasting and getting used to having dinner at 11 pm. Spend a maximum of 2 nights here.
2) Spend a 5-6 nights in Barcelona and the surrounding area. Spend a few nights in Barcelona, then rent a car and drive east. Stay in Cadaques for a night or two if you can and visit Girona as well.
3) Fly from Barcelona to Seville for the second week of your trip. Spend a couple of nights, carless, in your destination city, then rent a car and visit the surrounding region. Granada and Cordoba would be on my must-see list.

I'm not sure what your hotel budget is like, but I find that the following chains (which may not be familiar to North Americans) are often good value: Derby, AC hotels (now part of Marriott) and NH.

If you are interested in Guernica you should read the book..Can't remember the author but Google it and see. I got mine from Amazon.