I will be accompanying my husband on a business trip to Madrid in September. He will spend 3 days in Madrid, in a conference, and we’ll have 5-6 full days to ourselves. We are debating what to do. We were thinking about taking a guided tour to the South of Spain, but then we’ve heard the hotels and restaurants in these tours are horrible, and read about the boring tours to old churches. I know that almost everyone in the forum favors traveling on your own by car, but we are afraid of driving, getting lost, etc. The many decisions, which hotel, where to eat? With only few days to work with, should we just stay in Madrid?

It depends on what you like to do.

Many people think southern Spain is Spain and nothing is further from the truth. Spain has many identiies and languages. Suggest you read up on it.

You might decide to take in the very exciting Barcelona.

You may wish to make day trips from Madrid to Toledo and Segovia . After, you can take AVE ( fast train) to Cordoba ( stay a night) continue to Seville for 2-3 nights. Back to Madrid.
Barcelona is another option (if you can fly home from there) - only 3 hours by train. A fantastic city.

We have been to Spain 4 times and never rented a car.
Public transit is excellent.

The worlds most important flamenco festival takes place in beautiful Sevilla from 15th of September. 2h 30min from central Madrid by the high speed AVE train.
http://www.flamenco-world.com/notici...al22032010.htm

Sevilla has got one of the best tapas scenes in all of Spain:
http://azahar-sevilla.com/sevilletapas/

Regarding transportation:

The train system is pretty good if you want the fastest connection between two cities. E.g. the train ride from Madrid to Cordoba takes 1:42. By car, you would need more than 4 hours. For train connections, use the (German) website www.bahn.de. The Spanish website www.renfe.es does not always work.

Otherwise, driving a car in Spain is much fun. The roads are good and very scenic and it is a pleasure to drive (especially if you rent a convertible). Getting lost is not a problem. Buy a good map (to identify scenic roads) and a SatNav.

Regarding guided tours:
No need for tours at all. Spain can easily be explored on your own.

Where to go:
There are so many options: Andalucia, La Rioja, Cantabria and Basque Country, Barcelona, Costa Brava...

The region around Madrid is also very scenic and packed with attractions (El Escorial, Avila, Toledo...).

My recs are:
Read Maribel's Guides to Madrid, Barcelona and Seville
http://www.maribelsguides.com/

Full info about Madrid
http://www.esmadrid.com/en/portal.do

You can do Madrid & Barcelona or Madrid & Seville.
Don't hire a car, take AVE (high speed) trains or planes. Don't book a guided tour from Madrid to Seville or Barcelona.
Do book local tours:
Walking tours in Madrid
http://www.esmadrid.com/descubremadrid_en/portal.do

Hop-on, hop-off buses in Madrid
http://www.madridvision.es/en/index.php

A segway is a self-balancing personal transport device that has been designed to operate in pedestrian environments.
http://www.madsegs.com/

Convertibles with GPS
http://www.gocartours.es/madrid/

I agree go to Segovia, Toledo, but don't rush out of Madrid as it has alot to offer. The Fodors new itineraries also has some ideas, have you looked at that? Take the trains they are great.

I would definitely go to Seville for 3 nights and Granada for two. You don't need a car, I always prefer to take the train or bus in Spain as cars are a major hassle in old cities like Seville and Granada built before cars were invented. That way you'll experience the best of Castilla and Andalucia.

Cannot wait to visit

If you stay in Madrid check these guys out. I used them for a trip a few years ago and they were EXCELLENT and it was loads of fun.
www.adventurousappetites.com