I'm having the same issues.. While I want to stay at a mod or deluxe, I believe my kids will have more fun at Pop or Movies.. I really wish WDW would get on the ball with an upscale hotel that's more kid orientated!
To be honest, for most kids I bet the big icons at the values get old. When you get in the room, there is nothing really special about them except their small size and relative lack of amenities (I know if my family of four tried to stay in a value room for more than a few days we would end up killing each other). While the theming at the deluxes and moderates isn't quite as in your face Disney as the values, they are pretty well themed and have lots of cool aspects to excite kids. From the monorail (which is an attraction in and of itself) soaring right through the Contemporary tower to the savanna with real live animals at the AKL to the beach like tropical settings of the Caribbean Beach/Poly, they all have something to offer even if it isn't a giant Buzz Lightyear statue.
A much bigger concern for most kids than the theming is the quality of the pool (at least it was to me when I was that age). The moderates and deluxes all have amazing themed pool complexes complete with slides and some even offer sand-bottomed areas, zero entry, lazy rivers, etc. The values just have big pools with some cool statues and things around it, but they can't compare to the pools at the moderates and deluxes.
Almost all of the deluxes also have character breakfasts and kids clubs and other great activities geared towards children that can only be found at deluxe resorts. If you stay at the values, you won't get to do that as easily.
Aside from all the reasons above, why the moderates and deluxes offer just as much if not more for young kids, the fact remains that most kids don't care where they are staying as long as they get to go to WDW. Almost all of the hotels at Disney (with maybe the exception of the Contemporary, which makes up for its lack of theming with the amazing MK views and ) are richly themed and visually appealing to young children so you really can't go wrong. It isn't selfish to pick a hotel that you want in these circumstances because any hotel will be fun and exciting for young kids because it is in WDW! Believe me your kids would rather have happy parents at a moderate/deluxe than stressed parents in a cramped room at a value.
If you feel bad about dictating the resort choice with no input from your kids, to me the best plan for booking a WDW resort and still incorporating your children's input is to narrow the list down to resorts that you would feel comfortable staying at (based on price, comfort level, location, etc.) and then let your kids choose from that list. This way, your kids can feel like they have some say in the resort decision and can get excited for your choice, while you don't have to feel like you are giving anything up (the other bonus of this plan is it can help you make a decision when there are too many good choices).