I just moved to Madison from Sioux Falls. I was a regular since January at the Thursday night group at The Yarn Knit. That's in the 8th St Depot. Tracy is the employee who manages those and she's extremely friendly and knowledgeable. The group is mostly newer knitters and the atmosphere is very fun. They're at the very back of the lot, closer to 10th than 8th. If you're ever over there, Sanaa's restaurant is a must try.
There's also another group at Athena Fibers that runs at the same time. I never attended that group, but I have gone in to ask questions of the store owner. She's also willing to help and is very interesting to talk to, if a little intimidating at first.
Her store is absolutely beautiful. It's on the first story of an older house and she has a knit area set up with chairs near a bunch of windows. There are a bunch of scarves hanging from the mantle and it's just pretty. It's a little hidden, though. If you're on Western and 41st, head south to the laundromat, make a left. The road makes a T-intersection eventually and you'll want to make a right at that. The store is three or four houses down, I think. There's a sign, so you shouldn't miss it.