I KNOW THAT PLACE!!! (no idea what it's called though) But I'd never been inside and didn't know they sold USED CDs.

And now that I've got my head thinking in that direction I NOW remember ANOTHER used CD/DVD/Record shop in that same area. Here goes MY directions, no name of store, and no address (but I'll add it here in the next few days when I'm downtown next time)...

If you go in the SAME direction on Calle Arenal, starting at the Puerta del Sol and heading WEST towards OPERA, you go about 2/3 down the street and take a LEFT heading uphill slightly. On the right side of the street there's the shop. I recall that at first glance at the sign it almost appears to be a SEX SHOP or something but it's not. I bought some used DVDs there in the last year.

Saludos, MadridMan