Here is some info from a local Niagara Falls resident, who has been to both numerous times......
Great Wolf is great but it is big. With young kids it is hard to keep an eye on them. The Fallsview is much smaller which can be good with small kids. They have more freedom at Fallsview.
Fallsview's wave pool sucks! If you can even call it a wave pool more like a slow moving breeze. Great Wolf's is much better. I guess they had some structure problems when they built it and had to keep the waves turned down now. So if that is your thing Great Wolf is a better bet.
Yes, Fallsview is shared between 3 hotels. The Skyline has a direct pathway that is a kind of skywalk kind of thing over the casino driveway, that goes straight into the back of the waterpark, Crowne Plaza is directly linked too. And yes you have to go through the Hard Rock Cafe Restaurant to get to the waterpark from the Sheraton.
FYI the skating is NOT free....even for locals, there is only Free Times during the week so check the Winter Festival of Lights or TD Rink on the Brinks website for details.
Skyline Hotel use to be an outdoor motel and now it is closed in so it has these courtyards in the middle and yes they do play movies at night. Great Wolf has a dance PJ party which is awefully Loud so if you have a sensitive child beware. It does though have automatronic animals in the lobby which is fun. At Great Wolf the decor is top notch also, it is fairly new. Keep in mind it is also not in walking distance to anything so you will have to drive and pay for parking, where the other 3 are right down at the falls and in the heart of the tourism thing.
Hope that helps, we love both and have been numerous times. We like them both for different reasons, so either one is great! If you have any other questions about Niagara or the hotels just ask.