Hi Ann,
There are so many great resorts to choose from, it's hard to pick just one. I think that because your grandchildren are so small, your best option is to choose a resort close to Magic Kingdom. Wilderness Lodge or Polynesian would be my first choices. Wilderness Lodge is just a boat ride away, and Polynesian has easy access via monorail. Being at a deluxe resort is really helpful if you plan on heading back to your resort for a mid-day rest, which I absolutely recommend.
If a deluxe resort isn't in your budget, the value resorts are great fun! They are bright and colorful with lots of huge icons. The suites at Art of Animation feature some favorite Disney movies like Cars & Nemo. Pop Century is fun as well.
Character dining is always a must do for our family. Polynesian has a great character breakfast at 'Ohana right in the resort. You can also dine with Winnie the Pooh and friends at Crystal Palace. One of my favorite dining experiences for children that age is Disney's Play & Dine in Hollywood Studios. It features popular characters from Disney Jr., like Jake and the Neverland Pirates.
As a special treat, you might consider letting the birthday boy get a make-over at
Pirates League (if he happens to be a pirate fan). They'll turn your little grandson into a fearless pirate and teach him all the tricks of the trade.
Hope this helps get you started. Have a magical vacation!