Times shouldnt be a problem, I think you made a good choice! I love Bilbao!! I flew the Madrid-Bilbao route last semester a couple times, both flights were on time.
As far as transfering flights, when I returned to the usa, I flew Granada-Madrid, and then had only 20 minutes to transfer to my Madrid-Chicago, it was a stretch, but i did make it (security people let me go to the front of the line). If it does look close, one other thing you can do is ask to be seated towards the end of the plane from which you will exit (saves a lot of time), sometimes it was the front, sometimes the back on IBERIA.
Enjoy!
Kelly