Hi Jennifer!
Are your boys ready for summer? - I know that mine are!!! Since you mentioned that they are scared of the Fourth of July fireworks, they will most certainly jump out of their skin when they hear the Disney display!!! I never fail to leap out of my seat when they first go off - they are REALLY loud.
My favorite restaurant to watch Wishes at the Magic Kingdom is from 'Ohanas at the Polynesian Resort. Be sure to request a seat near the huge bank of windows and your problem will be solved. They can watch the amazing fireworks show from the comfort of their own seats. The restaurant even dims the lights and pipes the music in. Not surprising to those who know me, I usually tear up when this happens! Also, the atmosphere at 'Ohanas is super kid friendly and even the pickiest of eaters are catered to.
At Epcot, viewing Illuminations will be trickier. All restaurants with a great view of the show, are unfortunately, outside. One exception to this are a few tables at the Bistro de Paris; however, this is a venue that really just caters to romantic couples. Of course, kids are welcome, but may feel out of place. Even though Illuminations is not entirely visible from Future World in Epcot, it is still very, very loud. You may want to try watching the fireworks portion of the show from the Boardwalk - it's not nearly as loud over there!
Fantasmic is very intense, but GREAT! There are some loud noises and scary images, but most kids take it in stride. Your two year old may get a little antsy while waiting and may not follow the whole good versus evil theme. For more opinions on this, I can't recommend
Allearsnet.com enough. They have tons of reviews posted from other parents that may help you in your decision.
I hope that you have a magical trip in August - love to hear from you again!
Much pixie dust,
Jackie S.