If we take the AVE from Sevilla to Madrid Atocha Station, due to arive at 9:55 am, will we be able to catch the 10:20 am from Madrid to Toledo from the same station?

Yes, especially AVE (2.5 hours)! As for your connection: depends on whether you have to buy tix, how much luggage you are carrying, how fast you walk, etc. Under normal circumstances you shouldn't have any problem with 25min to make your connection.

Trains depart Madrid's Puerta de Atocha on schedule.

Wouldn't you have to change platforms and pass back through security?

LeslieC,
The AVEs from Seville do arrive on time.

In fact, Renfe has a guarantee that if the AVE arrives more than 5 min. late, and it's Renfe's fault, they'll refund your money.

In the AVE's 15 yr. history, this has happened very rarely.
It did happen Feb. 21 when a 170 ton construction beam fell on the tracks, even though it wasn't Renfe's fault.

But baring disaster, the AVE and the AVANT to Toledo are super punctual.

All you have to do is go one floor up pass the security, much easier and quick than the one in airports and then walk to the numbered exit for your Toledo train. It should not take you more than 10 minutes.
Both the arrival of the Sevilla train and departure of the Toledo one are in the same area of the station.
Just make sure you have your tickets ready.
If you wait to buy your Madrid-Toledo ticket in Atocha you may not have time for this connection.