You can't beat either choice.... as long as you are a progressive family who enjoys vacations beyond the walls of a Disney Park. Spain and Portugal have some incredible beaches (but warning... many of them are topless) There are also a load of very interesting cities to explore along the coast including Barcelona, Sevilla (inland a bit) and Malaga. Madrid is a blast too with the Prado and the Retiro park..... which is frequented by Mickey Mouse trying to make a buck on pictures, so if the kids miss the disney thing they can get a taste of it there.

Italy is wonderful as well. I did a trip to Venice, Florence, Naples, Capri, and Rome. A bit more historical depending on what you are looking at.

Oh, and Volareweb.com is a low fare carrier which flies between BCN-VCE for very cheap. I think I found a one way for under 100 euros so if you opt to combine the two, they are a good option.