We went in Sept. with our two girls, 6 and 8. They have been to WDW twice, but this was their first time at Universal. I just asked them which was their favorite and they both said Universal. Keep in mind, my older daughter loved IOA for the thrill rides, most of which your kids probably won't make the height requirements for. But my younger one loved it too, especially Spiderman, Jimmy Neutron and the Cat in the Hat. They will love Seuss landing, and the little play areas.
If by shows you mean live action, we only saw Voyage of Sinbad and the kids enjoyed that. It was nice to sit and relax for a while. We also caught half of Ghostbusters and that was fun.
Is it worth staying onsite? Absolutely! We went during slow season, but we still saved a significant amount of time with FOTL passes. If you are going during a busier time, it's invaluable. The other great thing about being onsite is the convenience. We stayed at the Hard Rock (kids loved the pool slide), and it took us about 7 minutes from the time we left our hotel room till we entered US. Add another 2 minutes to IOA. No cars, shuttles, parking lots to deal with (BTW, it is quite a walk from the parking area to the parks). Dinner, take your pick of any of a number of great restaurants at Citywalk. You can leave either park and be seated at a table in 10 minutes!
I know HRH is closest to US, RP is closest to IOA, PB requires either a shuttle, water taxi, or a good long walk. I don't know about the playplace, I'm sure someone else can answer. I definitely say go! Whichever hotel you choose I'm sure will be fine. Have fun!
