- Of those visited the last few years...
Madrid: While popular, these three are located together, and still do a great job for tapas, which are more Raciones, or appetizer sized orders. Casa Toni, the place for offal, the sweetbreads are divine, but also the fried baby squid are great, the potatoes bravas, chorizo, and lots more. La Oreja de Jaime, for the pigs ears, plus more. La Casa del Abuelo for the garlic shrimp. In most places, though not shown on the menu, you can order a half-racione, or half order, great if you want to sample.
There are tons of other options, I second the recommendation to watch the many James Blick videos on YouTube (Spain Revealed), lots and lots on Madrid, a couple on Seville, a few on Barcelona, and one on Granada. He covers some sit down type places, but mainly tapas. There are lots of other blogs on YouTube for ideas, and Time Out, Devour, and Eater are usually solid resources for food.
For Markets, of course stop into Mercato San Miguel, but it will be crowded. Great for a vermouth, sherry or wine, maybe a nibble, but some of the food is a bit disappointing. A better bet would be the humble Mercato San Anton, not as flashy, a bit smaller, but better if you want to actually sit and have a few things from different stalls.
Seville: We liked Casa Pepe Hillo for tapas, right across from the bull ring, and then Los Golondrinas over in Triana. Of course there were a half dozen more, but those two rose to the top.
Granada: Again, lots of places, but Bar la Riviera we kept going back to. True tapas, order a drink, you get a healthy size tapa for free, plus you get to choose from the decent list of tapas.
Second: Covered that above
Third: Reservations are only needed for the nicer, sit down places, if even then, maybe stop by earlier in the day or the day before and inquire.
Fourth. Try to adjust your eating habits. Typical is only coffee and something light right away in the morning, maybe something more at 9 or 10. Then the main meal is really at 1 or 2 in the afternoon. A proper, sit down meal at night is not until 9 to 11 at night, and is usually lighter than what you might eat for "supper". Point is, if you want a nice meal, featuring local food, in a better restaurant, eat that meal in early afternoon, that is when the restaurants will be open. Many eat a big buffet breakfast at their hotel, all but skip lunch, then are disappointed at the options in early evening. There will of course be places open earlier, serving tapas and raciones, options other than "Spanish" food like Italian, and those places serving the tourist trade will be open.