Hi, Ed,
I think Spain is a great place to retire to. You're right about the health insurance and the language. They won't be a problem. You would have to pay income taxes to the US (while living in Spain) only if your income is over a certain amount - it was US$70,000 a year last time I was filing for income tax in both countries, which was 4 years ago. I don't know, however, if there is a difference between income from employment and income from retirement.
I've come across a website where you can ask lawyers in Spain questions, and they answer online. It's at
http://www.marbella-lawyers.com/ They have an archive of questions, and you may find info there. If not, you could always ask them.
There is a book by David Hampshire called Living and Working in Spain. According to the reviews on amazon.com, it has information on retiring in Spain. May be worth a look.
There are so many retirees in southern Spain, the best thing to do may be to actually go there and talk to people. There are plenty of services available to them there, but they don't seem to be easy to find on the internet. Good luck, and let us know what you find out!
[This message has been edited by Diana (edited 01-31-2001).]