The fact that somebody came up with two different names for one species is really not surprising. A lot of that used to happen before we knew about DNA.
A quote from "Darwin's Ghost: The Origin of Species Updated" by Steve Jones, 2000, should clear up your argument. Species in scientific definition means separated by the inability to breed. Family has a precise scientific definition which has nothing to do with relatives.
From DG: "Linnaeus--a classifier of what he saw as a fixed biological universe--named the domestic dog as a separate species, Canis familiaris. For him, it had the same status as the elephant or the tiger: an animal so removed from its relatives as to demand a label of its own. The International Commission of Zoological Nomenclature defines its species more stringently. Dogs as an entity were doomed because, once out of its owner's sight, any dog is happy to have sex with any other--even, given the chance, with a wolf....
In 1993 the Smithsonian Institution's "Mammal Species of World", the Who's Who of mamals, admitted the domestic dog only as a subspecies of the wolf Canis lupus. As Canis lupus familiaris it joins the American wold Canis lupus occidentalis and the European wolf, Canis lupus lupus; each so much alike as to be ranked as mere varieties of the same animal." So there you have it:
Genus: Canis; Species: Lupus; Varieties: familiaris, occidentalis and lupus.