The house has pros and cons.
The pros: it's hard to get a more central location, everything is walking distance; the furnishings and fittings are of a high standard; it's good value.
The cons: depending on the size of your group, you may find it a bit of a squeeze (we were four adult males, two in a small twin room, one in another small twin room and one on the sofabad. We found it a bit cramped. For a couple with one/two small children, it would probably be OK); the flat is immediately above a chocolateria which is famous and always crowded, so you get a lot of noise well into the early hours of the morning. I was in the back room, so it didn't bother me so much, but my friend in the sofabed had problems sleeping; they could do with some more kitchen utensils and equipment. If a family or group wanted to stay in and cook dinner in the apartment they would not find all the equipment they are used to having at home.
Overall, I would recommend it with these reservations.
If I were going to Madrid again with, say, my wife and daughter, I would use it. Probably not if I were going with three other guys.