Hi Madhuri!
Congratulations on your son's birthday! What a wonderful way to celebrate, with a trip to Walt Disney World!
Regarding the "best" Disney hotel, I am being very serious when I say you can't go wrong with any of them! However, it's really hard to beat one of the amazing Disney Resorts on the Monorail Line near the Magic Kingdom. Besides having wonderful views of the Magic Kingdom and spectacular amenities, all you have to do is hop on the monorail to get there within minutes! These Resorts include the Grand Floridian, The Polynesian, and The Contemporary.
The Contemporary is especially great because Chef Mickey's is located there, and it is our favorite Character Dining experience, which includes Mickey, Minnie, Donald, Goofy, Pluto, etc...
To book your Character Dining experience, you can either book online here:
Disney Dining & Reservations, or you can book over the phone by calling 407-WDW-DINE (407-939-3463). I highly recommend you make your reservations in advance, up to 180 days prior.
You can also request a special birthday cake for your meal!
As for getting to see the Toy Story Characters, I recommend Buzz Lightyear's Space Ranger Spin attraction in the Magic Kingdom. You will often find Buzz nearby for Character greeting. And, I have seen Woody hanging around in Frontierland in the Magic Kingdom. And, don't forget to check out the Toy Story Mania in Hollywood Studios - it's a "don't miss" attraction! In addition, your son would probably enjoy Disney Junior Live Onstage in Hollywood Studios, with Mickey Mouse Clubhouse and other favorites from the Disney Junior shows.
I hope you have a wonderful birthday celebration!