We will be staying in Madrid late June for two days. From there, we want to visit Segovia an/or Avila and another day visit Toledo. We will have to return to Madrid to catch the AVE train to Seville. Here is the question:

a) we were thinking of renting a car in Madrid (hassle to do it and get out of the city) and then spending one night in Segovia (at the parador) travelling the next day to Avila getting into Toldeo in the evening (staying at the parador) and then spending the next day in Toledo before driving back to Madrid at night (again a hassle to get into the city and drop the car off). The next morning we will then go on to Seville. Has anyone done this and do you recommend or discourage it? Comments please.

(b) the other option is to take the train to Segovia (slow and 2 hours), stay ovenight, not go to Avila and return to Madrid the next day (again on a slow 2 hour train). The day after, just do a day trip to Toledo returning back to Madrid and then overnight to Seville.

What do you fine people suggest? Any and all comments would be greatly appreciated.

You might want to consider inter-city busses. Check out this site:

http://spainforvisitors.com/sections/gettingaround.htm

If the busses don't work for you here's yet another alternative:
rail to Segovia and pick up the rantal there; use it for the trip to Avila and Toledo; drop the car off in Toledo and rail back to Madrid.

Avis, for one, has locations in both cities. It may be more of a hassle than the busses but it is doable.

Since you are staying in the parador in Toledo, I'd definitely have a car there as the parador is not within walking distance of anything.

Good advice Patrick, but they can always call a taxi to take them back an forth. Actually, I prefer the taxi after going for a round of tapas. Who wants to drive then?

1. Driving around Madrid is a nightmare. And don't even think about doing it after dark, when the few road signs disappear. Be warned.

2. A car in Toledo is useless, even if you are staying at the parador. You cannot drive into town and you cannot walk there, so you will need to take cabs. You might as well save the problems and take the train and cab it to the parador when you get there. Better yet, stay in town. The parador is nice, but it it is far more practical to stay in town.

3. Skipping Avila is no big deal.

you said skipping Avilia is not big deal what about Sergovia, and if you said Sergovia yes. Would you do it by bus or train Thanks

It's been 35 years since I went to Segovisa by train and don't recall the trip as being overly long - perhaps I was just needing to rest!

I loved Segovia and would recommend going. I did not visit Avila - no reason other than not enough time.

We also visited Toledo (by 4th class rail bus - even Frommers recommended against it - but it was ok with us for such a short ride). We walked all the way from the train station to the other end of town - but we weren't carrying luggage. I wouldn't consider driving in the town.

Segovia is a yes.