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Hi there texan, well, to tell you the truth, I personally have seen many a Christmas in Madrid in recent years, and have found it to be extremely busy, I seen huge crowds of shoppers & visitors all trying to pour into the Puerta del Sol and generally all over central Madrid, all throughout the Christmas period, and well into & through into the new year, and one of the biggest mistakes I ever made was trying to get out of the Metro at the Puerta del Sol during Navidad, it took me half an hour of being pushed, shoved & squeezed in all directions. Madrid is an incredibly busy city to be in for both Navidad and New years eve celebrations, the last time I attended the new year party in the Sol, it was "Massive" huge crowds, booze everywhere, and if you're into all that and used to it then all the better, it won't phase you at all, but if you're not used to it too much or too often, the sheer volume of people can be overwhelming, very unnerving & perhaps a little scary, but like I said, if you're well used to partying on a grand scale, it would be great fun for you, but for me, I tend to prefer places like Zaragoza now for my Navidad & new years partying, I've had a few in Zaragoza, and it is much easier going than either Madrid or Barcelona, in which I've seen a few Navidades too, and they get a little crazy over there in Barcelona as well, I can tell you, but Santander is a little too cold & lifeless even for me at Christmas, so we tend to hop back over to our place in Zaragoza a couple of weeks before Xmas, and get ready for a very good but more sedate new years party in La Plaza del Pilar, (at least in comparison to Madrid's grand finale it is).
One of the things I most don't like when in Madrid when it's that busy at Xmas, is the queuing, longer queues, and you get to wait for longer, even sometimes as much as 10-15 minutes just to get a cup of coffee or a sandwich, and once it took me over an hour just to buy a pair of shoes.
But like I say, if your into all that, none of it will bother you too much, and you'll have a great time. Hope you do!!
Cheers/Saludos
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Where I live, Xmas Eve is the time to be with the family; it is a religious day and a huge meal is had late in the evening, here the main dish is fish, and not usually served till around midnight!! 
Xmas Day is not really celebrated to the extent that the US and UK do, though over the past years Papa Noel has been coming to see the children with small presents. Then its back to work until New Years Eve which is a huge celebration. The main event is of course the coming of the Three Kings on the night of 5th January.
