Well, I can tell you that we went on our first Disney vacay as a family in June 2011. There were 4 of us at the time (Me, DW, DD3, and DS 18mo), and we really try to do our best to stick to the kids' sleeping schedules when traveling. Separate bedrooms were a must!
Before we even decided on that though, I broke down the on-site and off-site costs first. Assuming we were staying at the cheapest resort on Disney property, even when I added in the cost of a 3 br condo for a week, car rental, groceries for breakfast and lunch, parking at the parks and an $800 allowance for dinners, the condo still came out almost $300 cheaper.
I'm talking a 3 bedroom condo, minutes from the parks, at a resort that also has other facilities like playgrounds and a pool. We were able to enjoy most breakfasts at the condo, and it was a great break mid-day to stop, get the kids a nap (or try to
), have a homemade lunch, and then head back to the parks in the afternoon. All in all, those were the best days for us when we could 'step away'. I think in a lot of cases too, we were better off with our own car than depending on the Disney trans - especially when you are talking about the value resorts that are farther away from the parks.
Another factor with us is that my wife is a teacher, so our 'window of opportunity' is very narrow and Disney rarely gives discounts during the summer.
So, really, only part of it is cost. A lot more has to do with your family situation and the convenience. I think when the kids are older, we may end up doing something onsite and 'splurging' on one of the nicer resorts. Until then though, I'll swear by my condo-loving ways.