In English, this could mean either they will remain for ever in Spain, or they will stay there as spend time on holiday - does the Welsh have this dual meaning as well?
Yes, although the future using 'bod' the verb to be would be more likely used to express staying somewhere for an extended period.
So, the short form = Arhosan nhw yn Sbaen am byth. (They'll stay in Spain for ever)
with bod' = Byddan nhw'n aros yn Sbaen am byth (They'll stay/They will be staying in Spain for ever)