I would choose option 2. Barcelona is like it's own country. a modern, cosmopolitan European city and deserves its own trip combined with the Costa Brava, Mallorca or even Basque country. Like London, New York, San Francisco or Tokyo I've always felt it would be a great place to live or work. It's just that for a first time trip to Spain Andalucia is so romantic. You need at least 5 nights for Seville and Granada.
Seville may be your favorite part of the trip. If you have an extra night consider Malaga, Cadiz or Ronda.

there is much more to see in and around Madrid than in Granada.
If you have 8 days on the ground Barcelona 3 days, train to Madrid, 3 days in Madrid (day trip to Toledo?), 2 days Seville.

If Granada is a must, Barcelona 3 days, fly to Granada 2 days, fly to Madrid 3 days.
Every time you move, you will lose half a day.

Option 2, but you don't need 3 days/ nights in Granada. Add day (s) to Madrid and take it away from Granada. Leave Barcelona for another time.

Spend 3 days in Madrid; take the AVE to Seville; spend three days there with a day trip to Ronda and then head back to Madrid for your flight home. Or, 3 days Madrid, take the train to Barcelona for 3 days and train back to Madrid. Don't waste a lot of time moving around and trying to do day trips here and there. You'll end up with a jumble of memories and pure exhaustion. Personally, I did not love love love Granada like many on this board - We loved Seville and Barcelona; culture, food, architecture, people and quite different atmospheres.

I would not attempt option 1.

With 8 days (and very likely a final night required in Madrid) I'd choose:

3-4 nights Sevilla (it will be a long travel day but take train after arriving in Madrid) - daytrip to Cordoba if 4 days
2 nights Granada
Final 2-3 nights Madrid - daytrip to Toledo and possibly Segovoia

OR

2 nights Madrid - daytrip Toledo
3 nights Sevilla -
2 nights Granada
final night in Madrid

OR

itinerary outlined by Sassafras above

Bottom line is you really need to decide where you want to visit based on your interests. If it's Madrid/Sevilla/Granada I'd budget at least 3 nights for Sevilla and 2 for Granada and 3 for Madrid. 3 places in one week is a little too ambitious for me - I'd stick with 2. But if this is your one and only trip to Spain I can see you may want to go with 3.

"One person recommended Barcelona...and the rest recommended to stay in Madrid, Seville and Granada... Any reasons why?"
Because this is a random sampling.
Option 2: but 3 days Madrid and 2 in Granada

Or course you will have to come back one day--it is a huge country, just visiting Andalucia would take a decade to see it all.