We are not big party people but it would be fun to be part of some type of public new years eve festivities. Anyone have any ideas which of these two cities would be more entertaining on this holiday? I have the option to be in either one. THanks!

My only experience in Madrid is with friends and family, but the whole city explodes on NYE. Explosions and fireworks everywhere, something akin to a war zone.

I haven't been to Lisbon in a number of years and never at NYE.

On New Year's Eve, Nochevieja (which translates better to Old Year's Night), as it is called in Spain, celebrations revolve around the eating of the grapes at midnight. The idea is to eat 12 "lucky" grapes (uvas de la suerte), one grape on each stroke of the clock (it is extremely difficult to do) washed down with cava (bubbly). This tradition was started in 1909 when grape growers had a production surplus and they thought that it would be a good way to get rid of it. So that, 2009 will be the first centenary of this "old" tradition.
Pic: The eating of the grapes in Puerta del Sol
http://img.vayatele.com/2008/12/puerta-del-sol.jpg