Okay, I've stayed at the Poly twice and I'll give you my best answers!
1. Building... We've had a room in Figi overlooking the Grand Floridian and the rooms across the hall overlooked the marina. Both rooms are considered "garden view". The view of the Grand Floridian was stunning, in the morning the faint fog on the water was beautiful and the twinkling lights at night were wonderful as well. This room was the first off the elevator, I can't recall the number, I'm not sure if the further down you go in the building the view changes or not. We also had a room in Tokelau overlooking the quiet pool. If we turned our head to the right we could see Cinderella's castle in the distance, this was also a garden view room. Both were non-smoking with balconies.
2. We didn't ask for an upgrade to lagoon view, nor was one offered to us, so I am not really sure what the policy is for this.
3. 'Ohana's is wonderful! Stop by the podium any time during the day and ask for a table near the window if you will be dining anytime around the Wishes fireworks. You can see beautifully from there and they dim the lights and pipe in the music. It's fabulous, 'Ohana is probably our favorite Disney restaurant of all.
4. We never did watch the fireworks or ELP from the beach, but it never looked overly quiet. We visited in December and November.
5. You can rent watermice right at the Polynesian marina, and each child must ride with an adult if they want to ride. They also provide life jackets to wear. I am not sure of the exact age that they have to be to ride alone, but I am sure it's at least 11 or so. My 4 year old nephew went with my DH this past December and LOVED it. Make sure to zip over to the Contemporary and go over the "water bridge that goes over the road". A Disney bus driver told my husband about this, apparently the little waterway that goes over to Bay Lake is manmade and actually crosses over the roadway near the Contemporary. Bring your camera/video camera because you can get GREAT shots from the boats!
6. We had a CRT for 8:05 on both trips, the first year we made the mistake of getting on the monorail at 7:15am and it did NOT stop at the MK. Make sure to get on the 7:30 monorail so you won't have to loop around an extra time. The monorail attendant can tell you if the monorail is scheduled to stop at the MK or if it is too early.
7. I don't know about how late the monorails run, the latest one we took was 10pm from the Contemporary. I would inquire about that at Guest Services, or look inside the Transportation Guide they give you at Check In.
Look for TuTu (spelling?) She is a wonderful Island Guide that made our trip extra special. When we were there in Nov of 2002 we took hula lessons in Luau Cove with her and had a FABULOUS time. I am not sure if the actual "lessons" still occur or just the demonstration that I saw going on Saturday morning. She also does wonderful arts and crafts with the kids in the lobby most mornings. She has been with the Polynesian from opening, if I recall correctly. Our girls sat with her one morning and strung lei bracelets and anklets and made Christmas ornaments for our tree. They loved her! We cried when we had to say goodbye, she truly is the spirit of 'Ohana in our opinion.
Bring with you, or buy grass skirts for your girls. I got some inexpensive ones with bathing suits at
WalMart this year, the ones at the Polynesian are NOT inexpensive and my girls wanted them the minute we got there. I wised up this year and brought them with us! You can also get some through the Oriental Trading Co catalog.
Make sure to read your Island Times guide, it has great info about what's going on at the Polynesian during your stay. My girls are 2 and 5 and they cry if we mention staying anywhere else at Disney, they love it there so much. Make sure to plan time in to enjoy the resort, it's absolutely lovely and relaxing.
If you have any questions whatsoever I'd be happy to help, just send me a PM anytime! Have a wonderful trip and aloha!