We did the 11-night Med cruise in 2011 with 3.5, 6 and 7 year olds and it was FANTASTIC! It's the way to go with littles, I think. Travel can be stressful and usually, especially in Europe, getting from place to place is the worst part. Letting Disney do that for you is amazing. Plus, it's Disney, so it's designed with kids in mind.
We did everything on our own (again in 2014 when we did the Greek Isles cruise), which makes sense for us, especially with little kids, so we can keep our own schedule and adjust on the fly if needed. We had some long days, but we also brought along our stroller. It was a little bit of a pain folding it up to get on and off public transport, but it saved us with giving our two youngests a place to rest and nap. The old streets killed the wheels in the end, but it was worth it.
I have the trip report in my blog if you are interested to give you an idea of our days, etc.