I have 6-7 nights to spend in Spain. We would fly into Madrid. I can't decide between renting a car and traveling from Madrid or just focusing on Madrid and Barcelona.

What did you want to see outside of Madrid?
There is the fast train between Mad and BCN, but I think the BCN are might be better saved for a future trip in which you could spend a week in and around the BCN area.

Madrid is worth 3 or 4 days. The surroundings of Madrid are very beautiful with excellent opportunities for daytrips: El Escorial, Toledo, Avila. We also enjoyed very much just driving the back roads and enjoying the scenery, having a picnic on a meadow with black steers in sight and snow-covered mountains as a backdrop...

Spend your time in Madrid and do two or three daytrips. You will get an excellent introduction into Spanish scenery and culture.

Personally I would rent a car and explore the interior of Spain. Go for those wonderful cities around Madrid, my list is every one of them.

The driving is easy, the sights unforgettable. With 6 or 7 days you could venture as far as Barcelona or Jaen.

The main problem is deciding where to go, what you want to see and how much travelling you want to do.

We go from just south of Jaen to France or Santander to get to the UK. I dream of the day when we can meander and explore.

Madrid is one of the great cities of the world. I've spent several weeks there and have never been bored or lacking new things to do. The museums alone are worth 7 days, to say nothing of the parks, esp. Retiro, the boulevards, the food, the flamenco, the music, and of course just sitting and sipping wine while people watching.
But if you feel the need to see something else, take a train somewhere and just sink in to a new experience. I agree with Yorkshire that Barcelona is too fabulous to do in a couple of days. Again, I've spent many days there and still missed significant sites. Cannot wait to return.

Suma flamenca, Madrid's most important flamenco festival, takes place between June 4th and July 2nd. These are all among the finest flamenco artists in the world:

Estrella Morente (5th and 23rd, song), David Palomar (6th, song), Miguel Poveda (10th, song), Israel Galván (11th, dance), José Mercé (12th, song), Enrique Morente (15th, song), Pastora Galván and Joaquin Grilo (16th, dance) and Antonio Canales and Amador Rojas (19th, dance). Easy to buy tickets on-line, but I'm sure your hotel will arrange it for you if you ask them. Most of the performances takes place at brand new Teatros del Canal.
http://www.flamenco-world.com/notici...ca19042010.htm

Also great flamenco shows every night at Cardamomo and Casa Patas close to vibrant Plaza Santa Ana, or at the world famous Corral de la Morería. Absolute top artists. Belén López is dancing at Casa Patas until the 5th of June. She also often dances at Cardamomo. At 22 she is already compared to the greatest female flamenco dancer of all times, Carmen Amaya (1913-63): http://www.youtube.com/watch?v=s1aHoufqeBw

If you like jazz, I can highly recommend Café Central in Plaza del Ángel, 10 and Populart in C/Huertas, 22. Concerts every night, entrance 9-10€. Both are close to Plaza Santa Ana.

A knowledgeable introduction to tapas and wine in Madrid: http://tapastalk.wordpress.com/tapas-bars/