Lately, we've been staying at the Periwinkle Campground and my parents stay at the Holiday Inn because they are so close to one another. When we go with our friends, we prefer cottages like the Beachview Cottages which has a good web site. You know the same company runs the South Seas and other properties on the islands, such as the Best Western and the Sanibel Inn. If you stay in one, you get a card that lets you visit all the other hotels and use their pools, game rooms, tennis courts, whatever. This is cool because they are all different and one has a nautalis-shape pool slide that the kids would like. The Best Western is almost perfect, but the screened porches are not all private, which is unusual. It's also on either West or Middle Gulf which puts you in a position where it's easier to get to the restaurants in Sanibel and on Captiva. The hotels on East Gulf have beaches that tend to be a little more crowded. We like a kitchen ourselves, as it's just more convenient to make lunch than go out when you're salty and sandy.
For restaurants, we like RC Otters ( which is owned by the same people who own the Hungry Heron,) The Bubble Room, and I can't wait to try Katie Gardenia's which is run by the woman from the original Bubble Room. Gramma Dot's is also fun.
When you first get on the island, you'll see the Chamber of Commerce visitor's center on your right which is a gold mine of free magazines, newspapers, and brochures (some with coupons.) They also sell for just a few dollars, a dining guide that has menus from almost all the restaurants on the islands, including prices for most. It's so inexpensive, but worth its weight in gold.
We've been going to Sanibel several times per year since the 70's and I just love it still. One more thing, in nearby Fort Meyers Beach, there is a bridge where all the shrimp boats dock, and the road next to it has some small seafood stores that have outrageously fresh seafood, not just shrimp. I couldn't tell you how to get there, though, but if you decide on a condo or cottage, maybe someone more local could.