Hi scott and welcome to the forum!
No, I don't think the fish food you have should normally have bugs in it. (This is not what they mean when they say "live food."

) I think what happened is that you might have gotten a package that was on the shelf too long and went bad. Have you ever had a package of macaroni get bugs? This is the same thing. I've had a similar situation with a box of catfood once. I suggest you take it back to the dealer for a refund.
The size of the goldfish will have some influence on the form of food you feed it. If it is small, stick to the flakes. If it is larger, say 3" or 4" long, you could give it the flakes or you might want to try granules. These are more substantial and the thinking is that they will swallow less air when they eat them.
Watch the fish's feces if you feed it a larger size food than flakes (and if it is in a tank where you can observe them). I have had a problem with large pieces of food passing through the fish undigested. This, of course, does the fish no good.
I'm glad you've come to the forum and hope you stick around. Many of us have started out in the hobby with one goldfish and have gone on to enjoy many years of pleasure with tropicals.
