That's a complicated question that boils down to what Napoleon judged was most expedient and beneficial at the time and circumstances.

There are different plusses and minuses in general to direct annexation v. having a client or satellite state v. having a state that was nominally independent or an ally while still at the mercy of France. The options that give a conquering power more control also tend to increase the administrative burden on the conqueror. Absorbing a large state filled with people who will resist may outweigh the benefits of direct administrative control. So we generally see France absorbing smaller territories in the Low Countries, Western Germany, and parts of Italy. Small (often wealthy) states mostly contiguous with France that were more easily digested than Austria Hungary or Prussia.

With the big players in Europe Napoleon had an incentive to get along with them, even when he was the victor on the battlefield. To simply dissolve the Hapsburg dynasty and take direct control of their territories would have made him and France even more of a pariah than they were during the Revolutionary period. Napoleon in popular memory has a reputation of a war monger which is only half deserved. Many times during his reign he wanted peace, and so had incentive to get along with his foes in the hopes that lasting peace would be the result. The problem was that Napoleon's idea of what peace looked like was of course very French centric and often at odds with his foes, yet the prospect of peaceable relations was at times an incentive for him to reach amicable agreements and to not be an existential threat to the major ruling families.

Not only was Napoleon in general not trying to destroy the major royal families, he was trying to join them. Napoleon of course made himself Emperor of France, and thereafter was conscious of the need to legitimize his rise. Later in his reign he actively pursued a marriage that would link his line to the Russian royal family. Failing that, he married Marie Louise, who was the daughter of Francis II, the Emperor of Austria. Throughout his reign, Napoleon tried to balance the progressive French Revolutionary ideals with the need/benefits of integrating his family and France into the old order.

While Napoleon didn't dissolve Prussia, he took a much harsher line with them arguably than the other major kingdoms outside of Spain. After soundly beating the Prussians at Jena and Auerstedt, Napoleon cut down Prussia in the Treaty of Tilsit. Under the terms of that treaty Prussia lost over 1/3 of its total territory, had to pay a huge war indemnity, and was forced by treaty to cap its army at 43,000 men. He also made sure to publicly humiliate the King of Prussia during the Tilsit negotiations. Much of this was done to show contempt for a power that during this time was not nearly as strong as France, Austria, and Russia. Still, he did not take the ultimate step of dissolving the Kingdom of Prussia because it likely would have scotched a peace deal with Russia. Even his harsh terms towards Prussia that fell short of destruction caused distrust and anger from the Russians.

Why Napoleon tried to incorporate Spain into his familial dynasty (but not the French Empire) is related to the weakness of the Spanish ruling family. While still powerful, Spain had fallen far since its days of dominating the European continent. The royal family at this time in Spain was one of the most dysfunctional in Europe, unpopular, at war with itself, and hopelessly inept at the task of tackling Spain's underlying structural problems. These weaknesses and the power vacuum in Spain convinced Napoleon that he could put his brother Joseph on the throne and it would be accepted by the Spanish people. This turned out to be a grave miscalculation that was seen as such even at the time, including by Joseph himself.

Napoleon's instinct to preserve the major ruling families rather than wiping them out was mostly just good statesmanship. Spain was the weakest of the big 5 continental powers (France, Spain, Austria, Prussia, Russia), but even with them the population would not accept France deposing the royal family and taking over. Napoleon attempting to do something similar to Austria, Prussia, or Russia would have likely been an even worse catastrophe for Napoleon than Spain was. Even Napoleon's massive invasion of Russia was not an attempt by Napoleon to overthrow the Romanovs. Napoleon fully expected to defeat the Russians in battle, and then to make a peace with them in which they (among other things) actually followed the Continental System. But it was never about supplanting the Romanovs or destroying Russia as a political entity.

My two favorite sources on this era are: The Campaigns of Napoleon, by Chandler; and Napoleon: A Life, by Roberts. 1809, Thunder on the Danube by Gill is an interesting look at the conflicts between France, Austria, and the numerous German kingdoms during that momentous year.