There is a great homemade cooking "casa de comidas" called La Sanabresa close to my place where quality and service is good (and fast) and you have two "plates du jour" (what we call "menú" or "menú del día") for 900 and 950 Pesetas each (that is $5.00!!). You can choose among several entreés (salads, gazpacho, eggplant, which is a specialty...), a main course and a dessert. Drinks are included (most of the people ask for vino con gaseosa). They don't serve coffee so you can leave the table relatively fast. The menu is in Spa-Eng-Fre. The menu was handwritten with comments like Delicious! Terrific! Really fresh! A must! and the like close to some of the dishes.
Clientelle: people from the barrio (like me), some smart chowhounds (some American, some French, some Australian), flamenco dancers (it's in a street where one of the most popular flamenco dance institutes were), young people.
And you have to see El Retiro Park on Sunday mornings. Amazing. I take some people from my family there sometimes. It has become the meeting point for the whole Peruvian community living in Madrid. Thousands of Peruvians in the SE area. They sell ceviche, leche de pantera, choclo, mazamorra, and other Peruvian dishes. The play soccer and they drink beer all the time. They dance, they talk, they take of their children...
Just a piece of advice.
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