Hostal Alcapulco was a great place to stay. It is completely charming and the staff is warm and friendly. They were nice enough to speak English (probably because they couldn't stand our Spanish!) and helped us find good places for dinner.
We had two rooms, one with a double bed and a single bed, and the other with 3 triple beds. The triple room had a nice balcony with a good view. The room was a good size with plenty of room to walk around. The double bed room was smaller and had no view but met our needs.
My hairdryer broke the first day and the staff had one that I could use during our stay.
They have free internet in the lobby which was helpful when we wanted to find info on where to go or directions.
We took a shuttle from the airport (go to ground transportation at the airport. We didn't have a reservation and they had a van for us in 5 minutes. 46 euros for 6 people) and the driver knew right where the hostal was.
The kids got a kick out of the old fashioned elevator even though it was so small that we usually ended up taking the stairs.
The location is fabulous. Just a couple minutes walk to 2 different metro stops although we rarely needed the metro since we were in the heart of the ciy.
Just two blocks away was the giant department store, El Corte Ingles. The bottom level is a grocery store and we were able to stock up on gluten free snacks for our kids.
We were also a 15 minute walk from the restaurant Da Nicola which had an extensive gluten free menu.
I would definately recomment Hostal Acapulco for a budget minded traveler to Madrid.

We stayed there four nights last December. The location was great, close to subway, restaurants, shopping. We had a room overseeing a small square, if you planning to go in the summer it can be noisy but I still recommend you to get a room with a balcony.

The owner, Javier was extremely helpfull.

This is an amazing hostel. It is comparable to many hotels I have stayed in. My boyfriend and I stayed there for 4 nights. The location is perfect, walking distance to all attractions and many subway stops within a 5 minute walk. The staff was extremely helpful and went out of their way to answer questions & offer travel help. Our room had great air-conditioning, TV, beautiful bathroom and a refridgerator. It was very clean and new.

When-ever I am in Madrid I will DEFINITELY stay at this hotel again.

Great Value, Good Central Location, Very Clean, Front Desk very helpful, Free Internet