spanishl, sounds like you're in/near the Argüelles area, no? I too like that area a lot but can't really afford anything there either. You'll have to give me some details about the flat you're selling.
The Quevedo/Chamberi area mentioned above by Daniel-Madrid is another one of my favorite areas. There, (and also in Argüelles) it's much cleaner, seemingly much safer (not that other areas are UNsafe, mind you), and there are parks nearby both of them. The areas are clearly "richer" as well (Argüelles moreso than Quevedo) so the public schools there might very well be better for your kids.
jmp110372, take a look at the rental options in Madrid at
http://www.Idealista.com . These rentals are for "normal people", not short-term tourist rentals. There, a 3BR place might well run you 1K+ Euros per month, depending on A NUMBER of factors including the following: LOCATION (first), Elevator or not, garage or not, terrace/terraza or not, views or not, interior versus exterior. And yes, rental prices have come down.
And thanks, jmp110372. Yes, I moved here at the very end of 2005 and never looked back - although I visit "The Parental Units" once a year but am always anxious to return to Madrid. How can one NOT be happy when they're in the place they love - AND when they're able to work from home at their own pace?!
Hope you too can make the move. Here are some websites which might help:
American Women's Club:
http://www.awcmadrid.com/Kids in Madrid:
http://www.kidsinmadrid.com/Expat Women Living in Spain:
http://www.expatwomen.com/countries/expat_women_living_in_spain.phpThere's also a kind of American Club here in Madrid which "assists" Americans moving here but I can't find their website now. Don't put too much emphasis or dependence on these, however. Afterall, you'll be in Spain. Become Spain. Don't fight it and you'll be so much happier here. So many "Americans" come here and can't stand going 2 weeks without the taste of Taco Bell in their mouths. Those people won't make it.
Saludos, MadridMan