Planes, Trains, Madrid Airport

Iberia are selling this as a valid connection on their website so you should be fine. I've never transited through T4 myself but it is very modern and was designed with connections in mind.
As long as you book the whole itinerary on one ticket, if your Boston-Madrid flight is delayed, Iberia are obliged to book you onto the later flight free of charge.
Good luck and let us know how you get on.

new castle said:

I am flying from Boston to Madrid, landing at 7:10AM in Terminal 4S.
I then plan on taking a connecting flight to San Sebastion at 8:50AM in Terminal 4.[...] how feasible is catching the 8:50AM flight, going from Terminal 4S to 4, and presumably clearing passport control?

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We have traveled several times with a similar problem (intercontinental - national), but always with IBERIA. One hour 40 minutes between arrival at one terminal in Madrid and departure at the other means rushing, and depending upon the lines at passport control one can get really nervous. We've generally made it. (one case of serious delay meant rescheduling our flight in Spain)
However, as Whalleyranger wrote, if you book flights with IBERIA, the airline will solve any connection problem. Should you fly with another airline to Madrid, and there is a delay at arrival, you'll loose the national connection and risk not having a seat on a next flight out.