Our family will have a 24 hour layover in Madrid on our return trip to the US in early July. We have two small children. I'd like to make the most of the time. Two big questions:

1)Where should we stay (airport, downtown, hotel suggestions)?

2) What is the "must do" with such a short time to spend?

Thanks.

Camelspit
With 24 hours definetively town center.
travel time by taxi to the airport, goes from 20 to 40 minutes.
With small children and in July, I will plan an early start visit to the Royal Palace then a walk around the Plaza Mayor area with "Tapas lunch".
Then two options, if the children can take it visit the airconditioned museum of "El Prado" otherwise plan an open air swimming pool for the afternoon.
I suggest you search the forum for hotel information and then revert with specific questions.
Hot Hot Madrid in July.

Car's advice is good, but the Prado is is quite boring unless you are deeply into old paintings.

If you asked the same question about any other major European city you would invoke a long list of major things to see and to do. Overall, there isn't much to Madrid. The Royal Palace is OK but minor league compared to other similar places in Europe. If you've seen others, I would skip it.

If you are the energetic type, I suggest going down to Toledo (1 hour by train.) Now that is well worth a visit.

I have to disagree with Platzer- I find LOTS to see and do in Madrid! Depending on your children's ages, they might really like the armory at the Palacio Real, with a fascinating exhibit of armor. The Retiro (Park) would be a fun place for children. You can rent rowboats, or just enjoy strolling. You could take the Telerifico (cable car) over to another park- the Casa de Campo. If you want to go to museums, the Prado, the Thyssen, and the Reina Sofia are all excellent art museums.
But what is probably the most fun in Madrid is just wandering around and eating at all the tapas places! Our favorite area is around calle Victoria. And you HAVE to get chocolate con churros! (the world's most amazing hot chocolate!)
I would definitely stay downtown. We loved the Villa Real, which had very large rooms with a sofa bed in addition to a king-size bed, but it is expensive- I don't know what your price range is. In the spring, we have been able to get rates of about 150-175 euros.
Children seem to be very welcome and enjoyed in Madrid.
Have a great time!

You might want to consider the Hotel Emperador. It is in the city center and has a great rooftop swimming pool. The Prado is spectacular, but might be a bit much for kids. As Marcy suggests, the Royal Palace and its armory are great for kids.

-- Chad