I'm asking this same question...I've read and read up on it and here's what my opinion is.
If you're staying value/mod and with the ages of your kids I think you'd be better off with a package with the dining plan. Your kids are young enough to get the
DDP for CHEAP! And, the convenience of it is fabulous. No worries about where you can eat/what you can afford, easier to make ADR, not worrying about what to order, more planning ahead, etc.
If you're staying at a deluxe resort, I'm not sure, but still your kids are young enough that the cost of the DDP is really negligible for them--a great value in my opinion.
We are a family of 5 and for our next trip (August 2008), two of my three kids will have to pay the adult rate for the DDP. When looking at the adult menu choices at a lot of the restaurants, I know there won't be much for them to choose from that they will actually eat. (They'd rather have the chicken fingers or hot dogs on the kids menu). So, I'm very hesitant about paying adult prices for them to have the DDP and then have them want kids price meals! Plus, we are planning to stay in deluxe resorts, so I'd LOVE to get some kind of discount on those reallllllly expensive rooms!
Good luck and enjoy, whatever you decide to do!