Hi there,
I live in Madrid, and in a choice between Madrid and Seville, would recommend Seville.
To me Seville is beautiful and has more for tourists to see - the Alcazar, the cathedral, the tiny windy streets of the arabic quarter, the parks, the flamenco shows, the palmtree-lined river. Its also much smaller, so gives a more intimate athmosphere. I was only there once, so sorry, cant advise on hotels.
Having said that, I wouldnt let crime put me off going to Madrid - there are a lot of pickpockets around in the main tourist areas, but if you follow normal precautions, it is safe. (well, I was mugged once, but still feel safe in general). Madrid also has many tourist attractions (the Prado, the large plazas, cathedral, palace etc) , but to me seems like more of a 'working' city than a tourist destination.
Buen viaje!
Applonia.