If thinking of Andalucia, my choice would be Sevilla, Cadiz, or Granada. You mentioned exploring Europe as a goal and it's quite nice to have an airport nearby- flying these days in Europe can be dirt cheap. The train is also nice but it will take you hours just to get to the border. I guess it depends on what they had in mind.
1500 Euro should suffice for a nice place in Andalucia but finding a furnished place could be an issue.
You ask how to approach the trip...it's a big one and they need to have considered immigration status, health care, education for the kids, daily transportation (because they will only be able to rent a car if they don't have a Spanish license).
Do they speak Spanish?
If the kids go to school, would it be a Spanish school?
here are some general housing sites for spain to get an idea of what's out there.
www.fotocasa.es www.expocasa.es there are also tons of sites for andalucia on the web. Do they want rural or city?
Have they considered a home swap?
Last question, how long before they are planning on going?
hope this helps