Hi Daryl:
Congratulations on getting a
The Crystal Palace reservation. It's difficult to determine if dining during Extra Magic Hours is a mistake as it will depend on how much your family wants to dine with Pooh and friends versus how much they want to enjoy park attractions.
As a Disney Resort guest, one of the advantages of Extra Magic Hours is getting morning or evening access to one park either before the park opens or after it closes. During the Extra Magic Hours, the Park is usually less crowded than it will be during regular hours, meaning you can generally take advantage of shorter lines.
While my family would likely enjoy the shorter lines than dining with characters, your family may have different priorities, especially if they want an easy way to meet Pooh and friends. Also, in general, the Magic Kingdom doesn't open the entire park during early morning Extra Magic Hours, and Guests usually only have access to Tomorrowland and Fantasyland. So if you were planning on riding Pirates of the Caribbean or Splash Mountain first thing in the morning, you won't miss anything by enjoying breakfast at that hour at The Crystal Palace.
Hopefully these tips can help you decide if keeping your reservation if right for your family.