The road from San Isidro/Sebaco to Telica/Leon is in very good condition. And that's a good thing, as there is no other decent road that cuts across to the west coast without going around Lake Managua or going up through Honduras. From Telica, the roads north and south are all very good.
The road from Leon to Poneloya/Las Penitas is brand new and in excellent condition.
The road south to from Leon is in very good condition for the first 26 kilometers. At this point, you need to decide where you want to go next. The road to the left as well as the road straight ahead will both take you to Managua. Straight ahead is what is called (in Managua) the Old Road to Leon, and the road to the left is called the New Road to Leon. The old road is in very poor condition, but this is the way you need to go if you want to go to Puerto Sandino, or if you want to get to places like Montelimar or Masachapa without going to Managua first. The old road at the Managua end is not as bad as the Leon end, but it is also in poor condition.
The road to Puerto Sandino - also in very poor condition with lots of potholes and broken pavement. Apparently, they had constructed a new brick road from Puerto Sandino to Miramar (and beyond?), but they either did it without any compaction of the bed, or they did it on top of saturated ground. My guess is that they just got finished when a big truck put ruts in it up to 2 feet deep in places. One place was so bad that it looked like an earthquake had buckled it. I would not try to take a car through here.
Back at the left turn to the New Road to Leon, this road heads northeast toward Lake Managua and Momotombo, and is in very good condition. After about 10 kilometers, before the road turns southeast along the lake, there is a small town called La Paz Centro. From there, there is a road to the left that goes to the Momotombo Reserve and to Old Leon/Puerto Momotombo. This is a brick road in good condition all the way to Old Leon/Puerto Motombo (Puerto Momotombo more or less surrounds the ruins of Old Leon).
When I left Old Leon, I had to decide if I wanted to back-track to the main Managua to Leon highway and through Leon to go back to Matagalpa, or take the dirt road shortcut north to Malpaisillo. The dirt road was about 25 km and was actually pretty good for a dirt road. It cut about 55 kilometers off the trip, and took, and probably saved about 20 minutes. Or I should say it could have saved about 20 minutes, but the road passes directly under/in front of the volcano El Hoyo (The Hole), so I had to stop a lot for pictures. As I said, the road is in good condition for a dirt road. Just watch out for the speed bumps at every school along the way (there are many). Being a dirt road, the bumps are completely without markings and are difficult to see until it is too late.