Hi Kate!
Thank you for bringing your question to the Disney Parks Moms Panel!
Be Our Guest Restaurant is very popular and for good reason! The atmosphere is so amazing that you literally feel like you're a Guest in Beast's Castle.
That is a late dinner and I think the answer would vary depending on your kids. Some kids are able to stay up late and be fine, while others need to stick to their normal bed times at all cost. When my boys were that age, I would have kept the reservation, but made sure that we had a midday break to (hopefully) get a nap in. I find that the parks are even more magical at night and there is something really special for kids to get to explore a world of fantasy in the dark, while staying up past their bedtime. To me, that is what makes magical memories.
At the same time, you know your kids best. If they absolutely would not enjoy it due to being tired, then you may want to cancel. Another idea would be to take the older one for some one-on-one time and let Grandma stay in the room with the younger one. It's always special to share some solo time in the parks with each kid.
I hope this helps! Please let me know if you have any other questions.
~Lori