What major military/political events led to Spain losing it's power?
What economic problems caused Spain's decline?
Do historians commonly talk about social issues playing a role in Spain's decline?
Or to some extent was the Spanish Empire in pretty good shape but just outclassed by the British and French?
By the time of the Spanish-American war could Spain have defeated or held their own in a war another European power?
While Spain was no longer the dominant European power by 1700, and maybe someone else can chime in as to how they lost that position, the War of the Spanish Succession greatly weakened the status and territory of the Spanish crown. The death of the last Spanish Habsburg Monarch, Charles II (who was so inbred that he was sterile), led to a succession crisis where the Crown of Spain was to pass to Philip of Anjou, a Bourbon and Grandson of the King of France Louis XIV. The other possible candidate was an Austrian Habsburg. The other powers of Europe were not keen on allowing a union between France and Spain, as such a union would essentially lead to a Bourbon-French hegemony. Louis XIV, of course, was keen on enhancing the power of France and the Bourbon dynasty.
Thus a long war occurred that was greatly draining to all involved. In 1713 the Treaty of Utrecht was signed, ending the war. The Spanish empire was partitioned: Spain and its overseas empire would go to Philip, the Bourbon king (minus the strategically important province of Gibraltar, which became British, and with the stipulation that the crown of France and Spain were to remain separate), while Spain's other European territories: The Spanish Netherlands (most of modern Belgium), Naples, Sicily, and Milan went to the Austrian Habsburgs. Thus Spain's European territories were reduced to Peninsular Spain.