My family of 5 (at the time... we now have 6) stayed at the Grand Californian last fall. That place is AWESOME!!! It reminded me of a smaller version of the Wilderness Lodge in Orlando.
We had a 4 year old, a 2 year old and an infant and stayed in one of the standard studio hotel rooms. We used their pack n play for the baby and had the older kids share a bed.
While we fit in the room fine for sleeping, it was a bit cramped with all of our luggage. I can't complain because we spent most of our time away from the room. We did overlook downtown disney (very cool) and the hotel is walking distance to both MK and CA.
They have a nice themed pool and the character breakfast (i forget the name of the restaurant) was great (Chip & Dale ~ but when you go with kids any CB is great

)
I highly recommend Toontown at the MK if you have small children (the one at
Disneyland is much better than in Disney World) and we had a ball at California Adventure as well. They have a Bug's Life themed area for kids that is pretty cool.
I can't say I know much about
DVC point exchanges for the standard rooms (we paid cash), but I've heard that it's never a great deal to use points for hotels.
Don't know about the other hotels, but I would DEFINITELY stay at the Grand Californian again.
Good Luck!
Geoff