I would very much like to eat a reasonably priced paella while in Madrid. I have read about many recommended restaurants but am having trouble finding one that is located in the areas tourists tend to be or close to my hotel, the Carlos V near Sol. Any suggestions would be welcome.

We ate at La Paella Real Resturant It was very close to the Plaza del Sol. The address I have is Plaza de la Opera, Arrieta 2.

I thought it was good and the price was around 40 Euros. The minimum size was for two so if you are solo it's a lot of food (but I saw a man at a table near us do it)

Some good places for rice in Madrid:
Segis, at Calle Alcalá
Sam at Calle Carlos Caamaño,
St. James, calle Juan Bravo, 26.

El Arrozal in Calle Segovia 13, just south-west of Plaza Mayor. http://gospain.about.com/od/madrid/ss/la_latina_9.htm
http://11870.com/pro/el-arrozal

Menu del Día mon-fri: soup/salad - freshly made paella/rice of the day - dessert and wine/beer for 12€.

thanks everyone for the suggestions. A few of these restaurants were on a small list I was considering, so your feedback has been very helpful.

I have read that the only paella one should order is one for a minimum of two as it is freshly prepared. Is that true?

At proper paella/rice places evrything will be freshly prepared. Some of the dishes will be made in large quantities and can be ordered for one, whereas some of the dishes will be made on order for a minimum of two people.