I fly this route and the Heathrow-Madrid route twice a month. This is my pitch in:
Agree that security in LCY is now bobbins and that machines slow the whole thing down. On Monday there was a baggage belt failure, as all check-in desks rely on the same belt the whole checkin area went into meltdown with people queuing out of the door.
The Embraer is much more pleasant for flying on than the Airbus that BA/Iberia use and economy actually has a decent breakfast on it.
There is no lounge in LCY and more often than not, nowhere to sit down either which may cause problems. LCY has lifts up to the security, but I have never noticed them down to the apron, so stairs only.
Food onboard Iberia in Club is very good, and the lounge at T3 is really good too with a good view of the runway, decent food offerings and an extensive drinks bar.
Flying into Madrid on BA you cannot use the Valaquez lounge, so if connecting you must use the Dali lounge in T4. Getting from T4S to T4 can be a confusing experience if you haven't done it before and involves a train and several lifts, takes about 20mins.
If you are travelling with older people, I would strongly suggest going from Heathrow for the following reasons:
1) Better Club experience for lounges and space on board
2) Less risk of standing around in the airport
3) Far less walking because you will arrive at T4 on Iberia, so just walk straight out to baggage reclaim
I am not sure what the complaints are about the lounges, I think even the domestic lounge is well-stocked, providing you have a taste for spanish-style food that is. As mentioned, often there is tortilla, tapas, usually ice cream, always have sandwiches and salads and well-stocked wine (where you can have someone do wine tasting with you on request)