You're overthinking the difficulties of traveling. But I wouldn't be happy staying with smokers and I wouldn't take being the allocated childcare whilst your dh relives his youth partying.
He's kidding himself if he thinks you can lie by the pool whilst your ILs play with the kids. The reality of holidays with the gps is they do 'shifts' of childcare but also want to enjoy some holiday too.
There's many a time MIL has got up early with ds1 on holiday, or babysat the odd evening whilst we go out. I still end up looking on in jealousy whilst the ILs enjoy quiet pool time or an evening sundowner on the deck whilst I handle tea and bath time. I'm grateful for their help but it's dh and I who are in charge. We can delegate bits but not the lot.
Nappies. - buy out there (cheaper than extra luggage allowance and certainly no more expensive than rip off Britain. ) Get pampers if you can.
Formula, the same. All these companies make the same stuff and many brands are international. Just take a few ready mixed bottles for plane there and back as I don't know about getting premixed abroad.
Spain is great for convenience of flight time plus supermarkets reliable.
You can go to places with baby kit if you like.
Take your own bottles, really lightweight so no problem. Or breastfeed for added convenience.
Steriliser. Get tablets and use a big pan (assume this is villa holiday as it's so much easier and cheaper generally). I've just used dishwasher.
Pram - plenty of lightweights lie flat. Maclaren one (xt?) with great sunshade, we have baby jogger city mini. It's a real investment. It was bought for a holiday when ds1 was 4mo and was in pretty much regular use up to when he was 3.5 and ds2 was born, been used from birth with him. It's a doddle to walk to gate, lift baby out, pick it up by handle and it collapses. We use it all the time not just for holiday, although I have a second travel system pram that's been used a lot too.
Car seat, not a hassle to take your own. Buy a cheap bag big enough to put it in. We have previously taken both seats in same bag for ds1 at 3.10 and ds2 at 4 mo. You're allowed to check them and it makes taxi to and from airport easy and safe.