We go every year with our kiddos and we love it. Last year was insane with teh Queen there. We got stuck in one location and it really wasn't pleasant. With the Prince and Princess coming this year, I expect the same crowds. We'll still go down but our plans will be different. The key is to avoid the front of Parliament just before and just after their arrival. The problem is that with the Queen there last year, they blocked off a large part of the hill so you couldn't actually get on the grass ... at least there was no way for us to get there. It made for a huge group of people that would normally be more spread out. If you want to see the musical ride, watch them warm up on the grass in front of the Supreme Court of Canada building. Very few know they are there and they're there for at least 1/2 hour to an hour warming up. You can then tour inside the building if you want. I'd avoid right in front of the hill between 10am and noon when royalty will be there. You can wander Sparke Street or head towards the Rideau Canal. You could also head towards Majors Hill Park. I'm sure you'll still see the snow birds that fly over around that time but just won't be in the immovable crowd. Our plan is usually to watch the musical ride, head to the hill to watch them there at 10am, hang out in front til the governor general/PM arrive. Watch the flag on top change when the GG arrives. Listen to them talk til the snow birds fly over. Watch them leave and then hang out on the grass watching the show. We head then towards the canal and to Majors Hill Park. Grab a chicken sandwich there for lunch and wander the exhibits there. We head out around 3pm or so to do things in our own neighbourhood. We tried it the same way last year and it just didn't work. We'll do the same this year but change the locations to avoid the front of the hill when royalty is there.
We stayed once, before kids, for the evening show. Its fantastic! If you're kids are late nighters, I'd leave part way through the day and head back for the evening show and fireworks.
HTH