Sarah,
A great time to take kids of their age to Walt Disney World is the September/October time frame. Since they are not in school yet, you can go at the slower times of the year when older kids are in school. Prices are generally lower, and sometimes there are great deals from Disney that will make it even less of a burden on your bank account!
As to where to stay, it is all about your budget. If you can afford it, the Deluxe resorts along the Magic Kingdom Monorail line are ideal (
Grand Floridian,
Polynesian,
Contemporary). Any of the Moderate resorts are going to be a great choice as well, and the Value Resorts are a super way to save even more without having to give up the 24-hour fun of being on Disney property. I would suggest that first you figure out which level of resort meets your budget, then select based on theme.
If you would like to send me any follow-up questions from my bio page, I am glad to help you narrow your search down!
Have a magical vacation!