Not sure about Madrid from Newcastle as an O&D route. Sorry to play up to stereotypes, but the lack of beaches in the Madrid area means I can't see it working.
Iberia might be a different kettle of fish, but if they were to start, I think they'd need at least daily rather than 3 to 4 weekly - The main benefit of an Iberia service would, as you say, be connections, and I think you'd need at least a daily service to fully utilise the connectivity at Madrid.
The gaps you talk about - Wales and the NE (Iberia don't fly to the West Country or Northern Ireland either but I'm nit-picking) - are probably the areas with the least propensity to fly, so no real surprise there. I'd expect CWL and NCL to be way down their list after MAN, BHX, EDI etc.