Howdy Katherine!
In my humble opinion,
Bay Lake Tower at Disney's Contemporary Resort is the perfect selection for you. My kiddos are similar in ages to yours and Bay Lake Tower offers many wonderful amenities for Guests of all ages but particularly, families with young children.
Let's begin with the location. You will LOVE being able to WALK to and from Magic Kingdom! The pools are great if the December weather will allow for some pool time. Chef Mickey's is a wonderful character dining experience located in the Contemporary and you will have easy access to the monorail as well.
The 1-Bedroom Villas at Bay Lake Tower are fantastic!! You will find a well equipped kitchen as well as a full size washer and dryer (yay!)! Bay Lake Tower also offers the wonderful perk of having two full bathrooms in the 1-Bedroom Villa!
The master bedroom has a king size bed and shuts off to the living area where your kiddos will be able to sleep on either the queen size sleeper sofa or twin size pull out mattress you will find in the oversized chair.
It is the perfect destination for your December 2014 vacation!!
Thanks so much for your question. If you would like suggestions for other Resort hotels, please let me know. You will be visiting Walt Disney World during one of my favorite times of year! I'm so excited for you!! Have a magical day!