It's hard to go wrong on Catalina.
Where are you staying?
I highly recommend Pancake Cottage for breakfast. Bluewater Avalon is a great place for lunch because the food is solid and they offer probably the best outdoor patio on the island.
For activities obviously you can do pretty much any water based sport. If you scuba then you probably shouldn't miss the walk in scuba option off the old casino (the big round building that you can't miss). Incredible wildlife, a stunning setting and one of the most convenient scuba options you will find anywhere. If you don't scuba but want to get up close with the sea life go snorkeling at Lover's Cove. It's a stunning nature preserve. Kayaking is also a really fun option.
Fishing is an option. Glass bottom boat tour can be fun if your kids are young (even if they are not) same for the flying fish tour.
If you just want to hang out on the beach I would recommend renting a mini-cabana at the Descanso Beach Club.
They also have a zip-line tour that is very solid, 5 stages I believe and on a couple of them you can really pick up some speed. It's kind of spendy though, I think $90/person.
Ultimately it's just a sleepy little beach community perfectly situated and designed for relaxing.
Oh and if you like candy you really should stop in at Lloyds' of Avalon which is an island institution. Watching the salt water taffy machine can be hypnotic.