I stayed 7 nights in the Hostal Fabiola. It is very basic but clean and the staff are helpful.
My only real moan was that the WiFi was unreliable. However there is an internet café just up the road where incidentally you can also call the UK on a proper phone for €0.19 per minute.
The walls are thin and every sound travels so quiet it is not. If you want to stay in central Madrid and save your pennies for other things the Fabiola is a good bet. I would go back :-)
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