If you already have an annual pass, you cannot get
free dining -- unless you pay for an additional ticket. In order to get free dining, you must purchase a package, which is to say, X nights hotel, a two-or-more-day ticket, and then the accompanying dining plan (QSDP or
DDP, depending hotel.)
Once you have purchased that package, you can use that ticket and upgrade it to an AP if you so wish (we did it at Guest Services in the parks,) OR, if you already have an AP, you can hang onto it for a later trip. It is on your KTTW card. The biggest risk for that is to remember to use your AP to enter the parks, and not your KTTW card!
I wouldn't get an AP unless it makes sense, admission-wise. The biggest perks with an AP are 1) ability to buy the TIW card (which is not usually helpful during free dining,) 2) a discount at most gift shops, and 3) potential hotel discounts. At the value level, the hotel discount is probably going to be fairly minor, and it is not offered year-round. I am an AP holder going on a free dining reservation next month (I will hold onto my two-day ticket for later use,) and wanted to book an extra night at the start of my stay as an AP-holder room-only. Despite the fact that it is the height of "low season," there is no AP discounted room available at my chosen hotel (Pop.) So I sure wouldn't get the AP for the room discount -- unless you were looking at staying at a $$$$ hotel and knew they had that room available!
Lastly, you can, as an AP holder, book a "ticketless package," which is the room and the (paid) DDP, if that helps you any.
Hope that all makes sense!