Do you have a CAA card? I just got one recently and am kicking myself I didn't have on earlier. Hertz gives a fantastic deal and I paid the best price ever this last summer with my CAA. They also give you a free booster seat, which you will need to have for your 5 year old (and maybe your 8).
I found my CAA card useful in booking hotels, even Kindred Spirits in Cavendish will give you a 5% discount.
The best month to go is July. Maritime weather is pretty variable, but July is usually the best. We go either late July to early August.
The maritimes cost about what it costs anywhere else, but don't forget the tax that Albertans don't have. Going out to eat has a 12% tax on your bill! Ouch!
My kids are 13,9,7, but we have been travelling every two years so we've been there at all ages. There are a lot of fun places to go to, but be wary of the driving...there is a lot of it to get anywhere. Make sure you have a lot of interesting things to do in the car for them.
I love PEI! The weather is always better than anywhere else and certainly its very relaxing. Its not a run around, hectic place like WDW or DL, but there is a lot to do and you will enjoy it
Order the dreamers and doers guide from NS and call the tourism bureau from PEI. They have great accomodation guides that will help you pick places within your budget.