Madeira is absolutely wonderful for hiking and sightseeing. It has huge mountains for such a small island. The topography is amazing with little villages hanging off the mountains and cliffsides. They have an old system of irrigation and water delivery channels called levadas. The entire island is criss crossed by them and there are many hikes, escorted and on your own, that you can take. I was simply in awe the entire time we were there. Many small pousadas (inns) with nice restaurants all over the island. Incredibly green except at the very eastern end. Definitely rent a car and explore. Don't stay at a resort but rather a small inn. Funchal is nice but a bit touristy. Please don't do the wicker sleigh ride down the streets in Funchal. Way overpriced, very tacky and dumb. Locals simply look at the stupid tourists in horror doing this. The island has a tradition of hosting British visitors so English is widely spoken in the tourist industry...more so than on the mainland.
The Canaries are package tour central. Tenerife and Gran Canaria (especially the south) are way overbuilt and full of fish and chip stands and Schnell Imbiss trucks. Outside of the tourist zones and on La Palma Island the food is fab and the lifestyle is beautiful. La Palma Island reminded me of Madeira actually, but since the Canaries are farther south, the weather is more tropical.