As of July 2007, the best gay nightclub according to the locals is Cool at Calle de Isabel la Catolica, 6, Madrid. Friday is the best night to go.

Here's a pretty accurate review. Nearest Metro is Callao or Santo Domingo. And remember, things don't get busy till well after midnight.

Be mindful of your wallet - would leave it in your hotel room and stuff cash/id in a front pocket.

Have a great time - Madrid is a truly wondrous city!