HI, I've been looking into teaching as well, and the good news is, getting your TEFL and getting work is easy. There are more students than teachers right at the moment.
Most schools offer a 4 week TEFL training course with an offer of work at the end. Cost about 1000 euros to be certified.
Bad news, wages are low and cost of living is high. Starting out I wouldn't plan on earning more than a 1000 a month. 2500 a month if your a highly qualified teacher. You can get shared flats for 300 to 500 a month.
Bottom line, teaching English would be a great way to do a gap year, but beyond that its hard to live on the money. Most people use teaching as a way to supplement their savings.
Also you have issue with work permits, not impossible but tough. I would suggest maybe spending some time at britishexpats and expatfoucus to see how others did it.
For information on shared flats go to in-madrid.com
good luck
Rob
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Be Canadian Eh, that's for all you American out there:)