The H&V character meal is a favorite of ours, and even though my kids are a little older than yours (now 4 & 7) they're big fans. Plus, it will save a lot of time if you want to meet Jake and Sofia (especially Sofia).
We will likely never do Fantasmic again. We went for the first time on our last trip (when the kids were 3 and 7) and it scared the crap out of both of them, after confusing the heck out of both of them! There is a large, scary dragon and a lot of fire at one point, but until then, the show really doesn't make any sense. I get that it's supposed to be a dream, but that's a pretty esoteric concept for young kids and they really had no clue what was going on through most of show. My kids aren't typically scared of things, but that show did them in. I wouldn't pass up a chance to meet the Disney Junior characters for Fantasmic, but clearly many people with kids enjoy it.