I've spent a lot of time in Arenal, but not stayed here, although I am a member of a geeky Menorca forum where this subject is discussed endlessly.
From what I gather, the all-inclusive is good value, with a reasonable choice and good quality, but not at all adventurous. If you want to drink lots of local beer / wine it is the best bet if you need to save money. The hotel is in a great spot next to the gorgeous horse-shoe beach.
Arenal does have a large variety of good quality restaurants (from traditional Menorcan to Chinese, Frenchy and English), and I love to sample local fayre on holiday, so I would only pick B&B if I stayed at the Aguamarina.
Interestingly, many resorts all over Spain are suffering from closures of local restaurants because so many holiday companies are offering very good value all-inc, meaning no-one goes out on an evening. 
I implore you, if you can afford it, don't choose all-inc unless you have no option.