I just spent 7 days in (April 21 - 27th) in the Sonsoles Hostal
located on Fuencarral in Madrid. This was the second time that I stayed here. It is only two blocks from the Gran Via. I could be at the Puerta del Sol in less than a 10 minute walk and the same to the Cibeles Fountain. Also the Gran Via metro is right there also.
The rooms are very nice and clean and quite reasonable. My room was located right on the street (the hostal is located on the 2nd floor), and although Fuencarral is a very active street, I could not hear anything.
The only difficulty that one might have is that the staff does not speak much English. And although the hotel does have Wi-Fi they do not have satelite. Only about 10 channels, none of which are in English. But, who comes to Madrid to walk television.
Remember though this is a hostal (but not a youth hostel). As such there is no room service, nor dining room, and you have to carry your own bags (though there is thankfully an elevator). But if you can do without those things, this is a great place in a great location.