I don't think that you would need a diode capable of handling the max current of the four MOSFETs. As you say, the heating element itself is going to be limiting the current to 40A, so that's all you really need to handle. You could definitely use multiple diodes in parallel if you need to, but I imagine a quick search of Digikey or wherever you prefer would probably yield many different parts able to meet the >40A peak current requirement with a single diode.
TO-220 packages are just a generic package type for various kinds of semiconductor devices, whether they are MOSFETs, voltage regulators, or diodes. Sometimes they will put a double-diode in a package with either a common anode (positive side) or cathode (negative side). I believe they also have 2-pin TO-220 packages available for single diodes. In some cases, the third pin might just be redundant, or just not connected at all. It depends a bit, but the datasheet should give the pinout details for any particular diode if you aren't sure.
If you are worried about massive current capabilities of the MOSFETs if the heating element got shorted or something, it might be a good idea to add a fuse in line with the battery. A simple blade-type automotive fuse for maybe 50-60A (or however much margin you want to have to avoid nuisance blowing) would be pretty cheap to add.
You will want to account for the fact that a cold heating element probably draws more current than a fully-heated one, so you will want your current ratings to be based on a cold element just as it turns on, or perhaps measure it for resistance using a four-wire resistance measurement for added accuracy at such low resistances.