I assume from your talking about sterling that you are in the UK at the moment. You should certainly be able to find a decent used bike for £400. However, if you can stretch that budget a little, this is a decent tourer for £499. And the shop in question - the Edinburgh bike co-op - has branches all over the place and has a sale on at the moment. They have various hybrids which would make practicable tourers at your sort of budget, take a look at their website.

As for doing the tour fixed, I agree with the advice. Madrid to Jerusalem is not a flat route. Even singlespeed as opposed to fixed, and taking the absolute minimum amount of stuff, that would be a tough old ride.