It's definately a splurge using DVC points to stay at one of the DL hotels, but if you have the points and you want to splurge, then go for it!
Sometimes, especially in the fall, you can find good deals for the DL hotels. This last fall they had "Stay 3 nights, get the 4th night free" at any of the DL resort hotels. We booked the Paradise Pier through Expedia for five nights, and with that special, it worked out to $135 per night. If you find a deal like this, it might make more sense to just pay cash. Or you could rent out some of your points to a friend or family member and then use that money to pay cash for a DL resort hotel.
As for the actual hotels, the Grand Californian is the most upscale and beautiful, and it's location for easy walking access to the parks and DTD can't be beat! You're literally steps away from all the fun! However, be aware that it doesn't have an arcade (if your teens are into that kind of thing).
The
Disneyland Hotel is very nice and has a fun Disney atmosphere with very pretty grounds. It has the easiest and closest access to the monorail going into Disneyland, and it's also the closest to the Rainforest cafe and the ESPN, all of which are just a short walk away (like a 2 minute walk). To get to California Adventure Park from the Disneyland Hotel, you walk through DTD, go into the Grand Californian Hotel, and follow the signs to the private entrance into California Adventure Park. (about a 8-10 minute walk if you don't stop and shop along the way
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The Paradise Pier hotel is also nice, has spacious rooms, and offers AWESOME views of California Adventure Park (if you get a room with a themepark view). Also, it has a pool deck that offers wonderful views of the fireworks, and they pipe in the music/narration too. So if you're too tired to stay in the park for the fireworks, or you don't want to fight the crowds, just grab a snack and drink from the fridge in your room, hop on the elevator to the pool deck, grab a lounge chair and enjoy the show! (We actually loved this when we stayed there). It is the furthest away from the parks out of the three hotels. It's about a 8-10 minute walk to California Adventure Park (using the private entrance at the Grand Californian), and about 12-14 minutes to the front gates of Disneyland (cutting through the Grand Californian) or 5-8 minutes to the DTD monorail station.
Also, I believe the unused days on your WDW passes can be converted into DL/DCA passes. I'm not sure exactly where you go to do this, but I would try at a ticket booth located outside of the park gates. I'm sure someone here can give you more specifics about this, but I KNOW it can be done.
Hope this helps you out.
