Senkare,

Good luck with finding tickets in your price range. Let me give you some hope. We flew from San Francisco to Madrid in December (!!) for $425. I've had good luck with Orbitz, where we bought these tickets. Plus, our Delta flight from New York to Madrid was off to Barcelona after we left the plane at Barajas. As for ticket prices coming down, yes, many prices tend to fall as the dates come closer and there are still seats to sell.

PS: There are some good threads in this Transportation section to read, especially the one on BestFares.com and TravelSelect.com. Good luck!!!