I guess even if they do check my bags all the way through, I'm wondering about 2 hours and 15 minutes between the AC and TP flights.

May not be enough to get through Schengen immigration at MAD and then board the short flight.

So I can take a flight which is two hours later, which isn't ideal but safer. I asked in the Spain/Portugal forum about this, not many responses about whether that kind of transit time is viable.