Lots of people have done this but there is one drawback. If the children are only English speakers the local school can refuse to take them. This happened to friends of mine. The had the option of teaching them Spanish or taking them to the local private school (there are English and American schools, but they cost). Other wise, there should be no problem apart from the children settling in a foreign country where they do not speak the language.
Another good forum - www.spainexpat.com
I have lived in Spain, but do not have children. My friends who do/did - found it quite easy - especially when the children were young as they picked up the language very easily. I don't know about schools refusing non Spanish speakers (first I have heard of it - but things may have changed in recent years).
The English run/speaking schools are all private and expensive.. Depends what you can afford.
They will be bi-lingual before you know it ;) !