Hi Erika,
Fantasmic! is one of my favorite shows at Disney World, ever! I hop you enjoy it as much as our family does. I do have to warn you that there are some parts that may be frightening for your small children. You can watch video clips of Fantasmic! on
YouTube.com. Just do a search for "Fantasmic Walt Disney World".
As far as lining up, I suggest being in line 40 minutes before show time. There will be a roped off area for guests who have booked the Fantasmic Dining Package. While, the entire party is encouraged to remain in their seats, taking your child to the restroom is perfectly fine.
There are restrooms in the theater area. However, I recommend making a stop BEFORE entering the theater. It can be difficult walking against the incoming crowds to get to the restrooms - especially if you have a child who lets you know they have to go to the restroom exactly 5 seconds before they are likely to have an accident.
Hope this helps. Enjoy the show and have a magical vacation!