If you're flying business then yes you'll get a light breakfast on LIS-MAD. Otherwise there is no food service in economy on intra-European flights.

AA flies from Terminal 4S, not Terminal 4, so you'll need to corral everyone to take the terminal train from T4 to T4S. Assuming passport control isn't super busy, 2 hours will be sufficient. But I would agree with doing 3:40 to be on the safe side.