1. In terms of the hierarchy of Central Places, Madrid would definitely fall under the category of either a major regional city (like a Chicago for us here in Kalamazoo) or even greater. Madrid is the capital and largest city in Spain, and is the third largest in the European Union behind London and Paris with a total metropolitan area of over 6.5 million. Some other cities and towns that would be associated with Madrid may include Seville, which lies a distance away but is a city that is more on a regional scale and still quite large (think Detroit). A town/small city that perfectly fits the mold of this theory is Avila, which has a population of over 50,000 but in any measure I could find, never was greater than 70,000. That could be a city like a Kalamazoo. In terms of bigger cities, I suppose Paris and London are the only two that could qualify as larger cities, and they aren't so substantially larger that I would say Madrid is below them on the hierarchy.
2. Madrid, being such a large city, offers virtually everything a smaller city wouldn't offer, including extensive depth in terms of entertainment and sports (multiple athletic franchises) and business (Madrid was once a top-10 city to do business in) to healthcare (various hospitals in Madrid). As far as what Madrid does not have that another city would, it is very tough to say without having lived there. Based on my research, Madrid is pretty much covered in all aspects, although perhaps France being more to the center of Europe may give them some more European Union offices.
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