Hi Jennifer!
Several panelists recently answered a question concerning the best times to visit Walt Disney World and you can see the answers by clicking
here.
With regards to where to stay, if your budget allows, there's nothing better than staying in a Disney Deluxe Resort. With small children, I recommend staying in a Magic Kingdom monorail resort. That will allow you easy access to your hotel room from the Magic Kingdom for a nap, swim in the pool, etc. My favorite monorail resort is the Polynesian, which also has easy access to the Epcot monorail line via a short walk to the Transportation and Ticket Center. Another resort that is a favorite of young children is the Animal Kingdom Lodge.
Unfortunately, I can't tell you if makes sense to be on a Disney Dining Plan or not, because I don't know how your family typically dines. You can get more information on the various plans
here. I recommend going to the independent website AllEars.com and looking at the various menus for the different restaurants at Walt Disney World. Then you can decide what you would normally order and whether being on the Dining Plan would save money for your family.
Since it is your first time visiting the Walt Disney World, I really recommend picking up a copy of the book "The Complete Walt Disney World" by Julie and Mike Neal. It is a beautiful book, full of photographs, and perfect for a first timer! It has just the right amount of information without being overwhelming! Also, be sure to order up your free
Walt Disney World planning DVD.