Should we stay overnight in Toledo then go to Seville?
 

I'm thinking about staying in Madrid for 2 nights and then going on to Toledo (by bus?) and staying overnight in Toledo. Then from Toledo taking a train to Seville (is this even possible or must we go back to Madrid?). Is the above do able? Just thinking in terms of saving time and money (we're a family of 5). What do you think?

You'll have to return to Madrid from Toledo to take the train to Sevilla.

With a family of five in tow , I would tend to simplify things. Therefore, I would do Toledo just as a day trip. As Robert well says, you would have to come back to Mad to take the train to Sevilla.

I recommend to travel to Toledo by fast train, just a half hour.

If it will take off a night from Seville absolutely not. You might find Seville and Granada to be the best part of the trip.

Thanks everyone! Really appreciate your help! We'll stick to our original plan then of making Toledo a day trip from Madrid.