I spent a year at Complutense, the big federal university in Madrid. I visited BCN twice. If you are wanting a true immersion program, there is no question that you should go to Madrid because there you will be immersed in Spanish. In BCN you will be immersed in Catalan. Sure, every Catalan knows Spanish fluently, but all of the newspapers, the television, the radio, the roadsigns, the cultural events, the menus, the labels at the art museums.... will all be in Catalan. The only Spanish you will hear there is that spoken by the Latin American (mostly Ecuadorian and Colombian) immigrants. So, you will have Spanish in your classroom, but you won't be immersed. And the point of immersion is to speak the language 24/7, which simply won't happen in Barcelona.

Madrid would be a true Spanish immersion experience. In addition, while most Catalanes are able to master several languages (usually Catalan, Spanish, English, and then either one of Spain's other two - Gallego or Basque), Madrileņos are simply not known for their linguistic skills. You will always be able to resort to English in Barcelona, but in Madrid you will be forced to use your Spanish.

Now, if you wanted to weight the nightlife, cultural attractions, etc., that would be a different question, but if you are serious about improving your Spanish, going to Barcelona is not very practical.