It sounds like you and a lot of PPs are confusing package holidays with AI holidays, when they're not necessarily the same thing.
A package holiday is just a way of booking accommodation transfer and flight in one go, which gives you extra protection. Your accommodation/board can be AI, SC, HB, one room, a two bed apartment, villa, pretty much whatever you like.
If you're really struggling, you could go into a branch of Hays Travel or an independent if you have one locally. They should be able to advice on which hotels have family suite type accommodation, or apartments that suit.
What sort of food depends on budget and dietary requirements - a buffet might suit so you can see the food and choose, but if you're talking about serious allergies, then cross contamination might be too much of a worry.
Self catering in Spain/Canaries might be good as supermarket food is often clearly labelled as are restaurant menus, but it depends on what your dietary requirements are as well as food preferences.