I checked on page 69 of three different volumes of Making Music Your Own, but no cigar. I think there are eight grade levels of Making Music Your Own. Maybe Q will have it.
We have a fairly complete index of Silver Burdett School Songbooks. The song didn't turn up under "madrid" or "Isabel" or "palace," so I'm wondering if there is a different title and "In Madrid There Stands A Palace" is the first line. I see the index covers only two volumes of Making Music Your Own.

We're big on school songbooks, though. Don't give up on us.

-Joe-